Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

ROYAL ASSENT

Mr. Speaker: I have to notify the House, in accordance with the Royal Assent Act, 1967, that the Queen has signified Her Royal Assent to the following Act:
Export Guarantees and Payments Act, 1970.

Oral Answers to Questions — HOME DEPARTMENT

Northern Ireland (Civil Disorders)

Mr. Rose: asked the Secretary of State for the Home Department if he will now consult with the Secretary of State for the Home Department in Northern Ireland concerning the provision of an amnesty for all those involved in civil disorders during 1969.

The Secretary of State for the Home Department (Mr. James Callaghan): I have nothing to add to my answer to a Question by my hon. Friend on 12th February.—[Vol. 795, c. 383.]

Mr. Rose: Is my right hon. Friend aware that the amnesty given to members of the R.U.C. and the acquittal of members of the U.V.F. on bomb charges contrasts startlingly with the continued imprisonment of people who were defending their homes in the troubles of a year ago? Does not he think that a reprieve for them would help to lessen tensions in Northern Ireland?

Mr. Callaghan: I do not wish to comment on a decision by a jury in Northern Ireland. I hope that my hon. Friend has not forgotten that the amnesty offered

to the R.U.C. by the Inspector-General was in relation to the same period for which there was a general amnesty. My hon. Friend is asking for a second amnesty in relation to later offences, but I think that the sooner the people of Northern Ireland generally regard civil disorders as the crimes that many of them are, the more likely the country is to get back to peaceful pursuits.

Lord Hamilton: Would not the right hon. Gentleman agree that the vast majority of people in Northern Ireland are concerned that hooligans and political extremists, who either provoke violence or take part in violence, should be subjected to the full rigour of the law and not be encouraged in further violence by amnesties?

Mr. Callaghan: There is always a time for amnesty. I do not dissent from the amnesty which the Northern Ireland Government offered on the previous occasion but, if there are attempts at explosions and attempts at murder, from whatever quarter, by shooting or in any other way, they should be treated as civil crimes and brought before the courts.

Riot Damages Act, 1886

Mr. Lane: asked the Secretary of State for the Home Department what proposals he has for amending the Riot (Damages) Act, 1886.

Mr. Callaghan: None, Sir.

Mr. Lane: As the Joint Under-Secretary of State has made clear to me in a helpful letter that the occasions on which a police authority might be required to pay compensation are likely to be very few, will the right hon. Gentleman consider carefully whether the best course might be to get rid of the Act? In today's circumstances, and in many people's eyes, it is apt to cast an undeserved stigma on the police and put an unreasonable liability on the ratepayers.

Mr. Callaghan: Those are considerations that could be taken into account, but I cannot offer any hope for the repeal of this Act. It was introduced in circumstances which bear astonishing similarities to what has been happening recently, and is a reminder that the accent on our current dicontents is not as novel as we might think.

Kenya Asians

Sir G. Nabarro: asked the Secretary of State for the Home Department in view of the recent official Indian offer to take approximately 30,000 Kenya Asians with British passports, what reassessment he has made overall of Kenya Asians immigrating into Great Britain.

Mr. Callaghan: United Kingdom passport holders in Kenya are able to enter India under an arrangement agreed with the Indian Government. There is no restriction on numbers under this arrangement, but I am not aware of any recent statement by the Indian Government in the terms suggested by the Question.

Sir G. Nabarro: Are not the Kenya Asians, many of whom want to come to this country, somewhat hostile to the idea of being repatriated to India? Would not it be sensible for the Home Secretary to cause the Foreign Office to initiate conversations in India, with a view to offering inducements to the Kenya Asians to return there rather than to come to the United Kingdom?

Mr. Callaghan: There is constant contact between the Indian Government and the British Government on this as on other issues. The hon. Gentleman refers to repatriation. This is the correct term, because over half of those at present in Kenya, according to the registration I have seen, were born in India and later left for Kenya to join in the prosperity of that country at that time.

Mr. Crawshaw: Will my right hon. Friend bear in mind that we are dealing here with people who, having been disowned by their own country, were betrayed by this country? Having regard to the shortfall in general immigration, cannot we now offer greater help to these people many of whom have skills which would be useful to us?

Mr. Callaghan: My hon. Friend's view is not shared by the great majority of the House, who voted overwelmingly that we should take the line of action that we did in 1968. The people concerned have been asked to wait in a queue for admission to this country but, as the Indian Government have made clear on several occasions, they are free to go to that country whether or not they were born there. As I have pointed out, a

great many were born there, and their period of sojourn in Kenya has been relatively short.

Mr. Hogg: Will the right hon. Gentleman undertake to keep the House informed of any developments in this difficult and painful situation? Is he aware that we should be glad of any information he can give us from time to time?

Mr. Callaghan: I am constantly questioned about this. I have no alterations in policy to propose as long as I have the support of the House in this matter.

Immigrants

Sir G. Nabarro: asked the Secretary of State for the Home Department what decline in immigrants entering Great Britain, including dependants, occurred during the 12 months ended 31st March, 1970, or the latest convenient date; and what further decline he now estimates will occur during the ensuing 12 months.

Mr. Callaghan: In the 12 months ended 28th February, 1970, the number of Commonwealth citizens admitted for settlement, excluding United Kingdom passport holders from East Africa, was 34,937 compared with 49,781 during the previous 12 months. This was a decline of 30 per cent. It is too soon to estimate entry for the 12 months up to 28th February, 1971, but the numbers entering this country have continued to decline in recent months.

Community Relations (Conference)

Mr. Barnes: asked the Secretary of State for the Home Department if he will make a statement about the conference on community relations which he convened on 18th and 19th March.

Mr. Winnick: asked the Secretary of State for the Home Department if he will make a statement about the conference on race relations which he held on 18th and 19th March.

Mr. Callaghan: The conference provided the Government, the Community Relations Commission and the Race Relations Board with a valuable opportunity to review developments since the passing of the Race Relations Act, 1968. There was general agreement that the Act has been effective in providing


machinery for dealing with discrimination, and I am glad to have this opportunity of saying so. The discussion also identified a number of points for further consideration by the commission and the board and by Government Departments.

Mr. Barnes: I accept that the conference was valuable in rebutting the propaganda of the right hon. Member for Wolverhampton, South-West (Mr. Powell), but will not my right hon. Friend agree that a great deal more needs to be done than the conference seems to have achieved? Will not he launch a much more positive drive to improve community relations in Britain?

Mr. Callaghan: This is a continuing process. I am always ready to consider new initiatives, but I think that the patient and unpublicised work of a great many voluntary people is probably producing steady, and I hope good, results.

Mr. Winnick: Does not my right hon. Friend agree that people should be free from the street violence which has occurred recently in the East End of London, about which there was a television programme? Does not he also agree that the recent statement by the Leader of the Opposition, in which he said that once immigrants are here they should be restricted, was a most unhelpful and illiberal statement?

Mr. Callaghan: In reply to the last part of the supplementary question, I do not know whether the right hon. Gentleman was correctly reported. I cannot conceive that anybody would think it realistic to prevent a person in this country moving from one town to another in search of a new job. In reply to the first part of the supplementary question, may I make it clear that, not only in principle but in practice, every citizen, no matter what his colour, is entitled to equal protection from the police in his lawful activities, and I know that the police will fulfil that duty.

Mr. Hogg: Whilst I wholeheartedly agree with the last words which fell from the right hon. Gentleman, may I ask whether he is aware that the policy which my right hon. Friend has enunciated from time to time—I have not seen the latest text—is that exactly the same general

position should exist as for Frenchmen and Scandinavians—and for Americans for that matter?

Mr. Callaghan: Yes, but what the right hon. and learned Gentleman has never seemed to be able to comprehend is that, on the whole, Frenchmen, and the others to whom he refers, come here for a short time, with the intention of returning to their own country, whereas the great majority of the Commonwealth citizens who seek entry vouchers come here for the purpose of permanent settlement. I hope that he will explain this to his right hon. Friend.

Mr. Hogg: Does not the right hon. Gentleman appreciate that our policy is that they should not in the ordinary course come in for permanent settlement at first instance? That is the difference between us.

Paint (Lead Content)

Sir R. Russell: asked the Secretary of State for the Home Department to what extent international agreement has been reached on the maximum proportion of lead which should be contained in paint used for finishing goods for export to another country, especially toys; and what representations have been made to the governments of countries which violate the agreement.

The Joint Under-Secretary of State for the Home Department (Mr. Merlyn Rees): There is no international agreement relating to the lead content of paint used on toys or any other articles.

Sir R. Russell: Is not it desirable that there should be agreement? Is the Joint Under-Secretary of State aware that this question arose because toys imported from China and sold in the London Borough of Brent were finished in paint with a lead content of 21 per cent.? Should not we prevent such hightly dangerous toys coming in?

Mr. Rees: Considerable quantities of toys are imported each year, only a very small proportion of which are found to contravene the regulations. Nevertheless, I think that a small loophole has been found in Brent. We are looking into this.

Women (West Midlands Remand Accommodation)

Mr. Dance: asked the Secretary of State for the Home Department in view of the closure of the women's wing at Brockhill Remand Centre, what proposals he now has to provide remand facilities for women in the Midlands.

Mr. Montgomery: asked the Secretary of State for the Home Department what proposals he now has for providing a remand centre for women in the West Midlands area.

Mr. Merlyn Rees: Having reviewed this question my right hon. Friend accepts that remand accommodation should be provided in the Midlands for women, but cannot give the proposal immediate priority over the other even more urgent claims on resources.

Mr. Dance: Is not the Minister aware that most of these women are now housed here in London at Holloway, which is over a hundred miles from where their trials take place and that many of them are mentally disturbed? In view of the high expense involved in bringing solicitors and lawyers to London and providing police escorts, and the general inconvenience to all concerned, should not something be done forthwith without any more delay?

Mr. Rees: There are less than 250 women and girls now remanded in custody all over the country. The geographical distribution of this small number of women raises a similar problem in East Anglia, in Wales and in Cornwall. In the longer term when it is proved necessary to have a remand centre we will look sympathetically at the Midlands.

Mr. Montgomery: I thank the Under Secretary for his answer, in which he promised that something will be done eventually. Could he not be more forthcoming and give us a clearer indication of when action will be taken? A woman in my constituency was recently put into a distressing mental state through having to be hauled up to Risley every day. May we have an assurance from the hon. Gentleman that this matter will be treated urgently?

Mr. Rees: I repeat that there is a similar problem in all parts of the country because of the small number of women concerned. When a new remand centre is proved to be required in the longer term, we will look sympathetically at the needs of the Midlands.

Mr. Hogg: I know that the hon. Gentleman is a very humane man. Does he not realise that after these women have completed their journey they have to take part in a criminal trial or in preliminary proceedings in which they are defendants? Is it not intolerable to ask such a person, after having travelled 200 miles in a day, to be subjected to a criminal trial?

Mr. Rees: This has been happening for a very long time. It is not a new subject. The indignation of the right hon. and learned Gentleman therefore is new in this respect. There is a problem, but it arises out of the low criminal rate amongst women. I would point out that there is short-term accommodation in most parts of the country. I agree there is a problem, but we have to look at other priorities.

Mr. Dance: In view of the unsatisfactory nature of the reply, I beg to give notice that I will raise the matter on the Adjournment at the earliest possible opportunity.

Prison Industries

Mrs. Renée Short: asked the Secretary of State for the Home Department if he is satisfied with the pace and direction of the reorganisation of prison industries, particularly as they affect the long-term prisoner; and if he will make a statement.

Mr. Brooks: asked the Secretary of State for the Home Department whether he will take steps to provide prisoners with employment and earnings such that they can acquire skills and make savings, with a view to helping them lead law-abiding lives upon release.

Mr. Callaghan: I would refer my hon. Friends to paragraphs 46 to 66 of the recent White Paper "People in Prison".

Mrs. Short: In congratulating my right hon. Friend on the steps taken so far to reorganise prison industries, may I ask


him to bear in mind that there is an urgent need, particularly for the more intelligent long-term prisoner, for work commensurate with the prisoners' own capabilities and an equally urgent need to match the week's work in prison with the week's work done in industry outside? Would he also bear in mind in connection with the present building programme the highly successful projects carried out by prison labour and will he repeat these in the future?

Mr. Callaghan: I am obliged to my hon. Friend. I in no way take exception to the pressure to spend more money in improving our prisons, or the conditions in them, or the circumstances in which work is done. In fact, we are spending something like £600,000 this year on additional workshops alone, with £430,000 projected for the future. It is a question of priorities. At the moment we are concentrating on long-term prisoners. It is important that they should be provided with adequate work. I note the constant desire of the Opposition that we should spend more money on all these matters. I hope they will remember it when discussing reduced taxation.

Mr. Brooks: Is it not important to give sensible earnings to prisoners so that they can contribute towards restitution to their victims, or alternatively accumulate savings which could be made available to them on release, or after a fixed period of law-abiding activity?

Mr. Callaghan: The payment of high wages must be related to the pace of activity in prison industries. At the moment they make a loss, although if our plans succeed it is hoped that that loss should be turned into a profit in the next three or four years. As that happens, we can increase the amount of wages paid.

Released Prisoners (Hostels)

Mrs. Renée Short: asked the Secretary of State for the Home Department if he will make a statement about the number of hostel places available for prisoners on release; and what increase is estimated in these places during the next five years.

Mr. Merlyn Rees: On 31st March, grant under the Home Office After-Care Hostels Grant Scheme was being paid to 81 hostels, providing 899 places. Grant

has been approved in principle for an additional 16 hostels, providing 163 places. Applications from 7 hostels, providing 56 places, are under consideration. Present estimates are based on the assumption that an additional 200 places will be made available annually.

Mrs. Short: I thank my hon. Friend for that encouraging reply. Is this work being channelled mainly through the voluntary organisations which are carrying out such excellent work in after care, and has he any other ideas about expanding and extending this kind of provision, particularly for young offenders after serving sentence?

Mr. Rees: The answer to the first part of the question is 'Yes". On the second part of the question, we are looking at this matter constantly. I agree that when one has reviewed the situation there may be need for more accommodation of a different type, perhaps of the bed-sitter type, for example.

Fireworks

Mr. Gwilym Roberts: asked the Secretary of State for the Home Department if he will make a statement on his recent meeting with groups interested in firework accidents; and if he will now introduce legislation to reduce the number of accidents due to fireworks.

Mr. Merlyn Rees: I would refer my hon. Friend to the reply which my right hon. Friend gave to a Question by my hon. Friend the Member for Kingston-upon-Hull, West (Mr. James Johnson) on 9th April.—[Vol. 799, c. 109–10.]

Mr. Roberts: Would my hon. Friend accept that while we all welcome any provision aimed at curbing firework accidents, many of us fear that the effect of raising the age in this respect will be minimal and that what matters is not who buys the fireworks, but who uses them? Will he accept the view of a large section of the public that, unless we have a much more rigid curb on the sale of fireworks to the general public, we will have many more firework accidents? Our fear is that thousands of accidents will occur before this type of legislation can be brought in.

Mr. Rees: The number of accidents fell rapidly last year. The age which at the moment is 13 is to be found in the


1875 Act and this ignores many social changes which have happened since that time. This is a desirable change to make and we believe that it will have an effect on the number of accidents.

Mr. St. John-Stevas: Would the hon. Gentleman agree that even today some responsibility should be left to individuals and that the solution is not a ban on fireworks but a stringent enforcement of existing safeguards?

Mr. Rees: I agree with the hon. Gentleman and I hope that many local authorities will see fit to run communal firework displays which I am sure would have an effect.

Witchcraft

Mr. Gwilym Roberts: asked the Secretary of State for the Home Department if he will introduce legislation to provide penalties against individuals claiming to practise witchcraft.

Mr. Merlyn Rees: No, Sir.

Mr. Roberts: Will my hon. Friend accept that I appreciate the difficulties in introducing twentieth century laws against this type of medieval nonsense? Would he also accept that there are some dangers associated with this subject in terms of drugs, blackmail and even the gullibility of some sections of the general public? Would he use his famous ridicule and wit like many Welsh wizards of the past in this House to pour parliamentary scorn on the whole of this rubbish?

Mr. Rees: I think witchcraft and wizardry are two separate examples of the arts. The legislation in 1951 deals with this matter, but I agree that in view of the stuff one has read recently perhaps my hon. Friend ought to be looking at the laws on indecency and the common law on conspiracy to corrupt rather than to the sort of legislation to which he refers.

Mr. Fry: Is the Minister's unwillingness to legislate due to the fact that lie feels this might be made to apply to those people who prepared the Labour Party's election manifesto?

Mr. Rees: I think the hon. Gentleman has been reading the material from the other side of the square.

Illegal Immigrants

Mrs. Knight: asked the Secretary of State for the Home Department whether he will take steps to end the situation whereby an immigrant who enters Great Britain illegally need only remain undetected for 28 days to have his entry accepted.

Mr. Montgomery: asked the Secretary of State for the Home Department why an illegal immigrant must only remain undetected for 28 days to have his entry accepted; and what plans he has to remedy this situation.

Mr. Merlyn Rees: A Commonwealth citizen who enters the United Kingdom without being examined by an immigration officer commits an offence for which he can be prosecuted up to six months from his illegal entry.

Mrs. Knight: But since the Commonwealth Immigrants Act, 1968, specifically extended from 24 hours to 24 days the period within which a Commonwealth citizen may be required to submit to examination by an immigration officer, does the hon. Gentleman not feel that there is a widespread belief that the situation by which many of those who traffic in the filthy business of helping people to come into this country illegally ought to be altered?

Mr. Rees: There may be a widespread belief, but I hope the hon. Lady will help to dispel it, because people who believe that are wrong. What in fact happens is that, up to 28 days, an immigration officer can deal with the case and send a person back as if the person had not entered the country. Up to six months, as with other summary jurisdiction, the person concerned can still be prosecuted. Therefore, it is not 28 days, but six months.

Mr. Montgomery: Does the hon. Gentleman not feel that this is completely illogical? Is it not tantamount to saying that somebody who has committed a criminal offence and who remains undetected for six months should then go free? Why do we have this discrimination in favour of people who enter the country illegally?

Mr. Rees: There is no discrimination, because under the general provisions of


the law, which are concerned with all people whatever their colour or wherever they have come from, under the Magistrates' Courts Act, 1952, a person cannot be prosecuted after six months have elapsed. It is not a special rule in this case, but is something to be found in many walks of legal life.

Mr. Hogg: While I agree with the hon. Gentleman that the period of six months is the ordinary period for summary offences, is he not aware that what is done in these cases sometimes amounts to common law conspiracy, in relation to which the period is indefinite and can be followed by deportation?

Mr. Rees: The right hon. Gentleman is correct with regard to common law conspiracy. This policy ought to be brought to the notice of those who are wrongly informed on this matter. Because of the problems involved in the period of six months, the matter is worth keeping an eye on if it is felt that a large number of people are entering the country in this way. But our evidence is that this is not the case.

Mrs. Knight: asked the Secretary of State for the Home Department whether he will end the practice whereby immigrants who enter this country illegally and remain without detection for 28 days are entitled to entry certificates for their dependants.

Mr. Merlyn Rees: The wife and children under 16 of a Commonwealth citizen resident in the United Kingdom have an entitlement to join him, provided they have obtained entry certificates. My right hon. Friend has in mind the possibility of amending the law so as to remove this entitlement if the man's entry was unlawful or he has exceeded his permitted stay.

Mrs. Knight: Could the Minister assure his right hon. Friend that such a move would be warmly welcomed, because there is no excuse for anybody who has entered the country illegally to be able to bring in a wife and dependants, particularly at a time when so many holders of Commonwealth passports are not able to come to this country?

Mr. Rees: The dependants have to have an entry certificate in the country of origin, so that it is not likely that

people who are illegally here would apply in under six months. In my experience the large majority of people who are here illegally came here longer than four or five years ago, because immigration control is much firmer and tighter in recent years than it was in the past.

Anguilla (Policemen)

Mr. Marten: asked the Secretary of State for the Home Department what is the average time spent away from the United Kingdom service of the British policemen in Anguilla.

Mr. Merlyn Rees: Three months.

Mr. Marten: I should like to ask the Minister two questions. First, how many of these policemen are still there? Secondly, why are they still there?

Mr. Rees: I suggest that the hon. Gentleman puts his second question to my right hon. Friend the Foreign Secretary. This Department is not responsible for policy. I know that there is a good reason.
The establishment of the units in 84 police officers and two technicians. The strength is the same.

Television (Violence)

Mr. Barnes: asked the Secretary of State for the Home Department what consultations he has had with the British Broadcasting Corporation and the Independent Television Authority about violence on television.

Mr. St. John-Stevas: asked the Secretary of State for the Home Department whether he will make a statement on the talks he has had with broadcasting officials about violence on television.

Mr. Callaghan: I had an exchange of views on this and related subjects with representatives of the British Broadcasting Corporation and Independent Television Authority last month; I am hoping for a further discussion shortly.

Mr. Barnes: Will my right hon. Friend take care not to encourage some of the irrational prejudices which exist? Is it not equally possible to argue that for many people the spectacle of violence on television can have the effect of purging violent emotions? Cannot these matters


safely be left to the broadcasting authorities?

Mr. Callaghan: This matter raises difficult issues. For every piece of evidence on one side I find an equal and opposite piece on the other. It is clear that far too little is known about the consequences of the portrayal of violence on television. As long as so little is known, and therefore no conclusions can be reached, and as long as there is great public concern about both the increase in violence and its portrayal on television, it is the duty of everybody to go very slowly in what they depict.

Mr. St. John-Stevas: If so, and if the Home Secretary wishes to achieve something other than a cover-up for the gaffes of his more permissive colleagues, should he not be proposing a programme of research into the effects of violence on television so that the question can finally be answered?

Mr. Callaghan: Yes, Sir. I hope that is one of the things to which discussions will lead. It is regrettable that after all these years more is not known about the consequences, although there has been a substantial programme of research, and a lot of money was set aside by the Independent Television Authority some time ago for the benefit of research by Leicester University.
The B.B.C. and the I.T.A. have perfectly reputable codes on the question of violence. I have read them carefully. If they were adhered to I do not think that there would be very much complaint from the public.

Mr. Strauss: Is it not generally accepted that it is highly undesirable that children and adolescents should get the impression that acts of violence are normal or acceptable in a civilised society? Does my right hon. Friend agree that the controllers of the B.B.C. and I.T.A. programmes apply their codes, that episodes of violence are kept to a low level, and that allegations to the contrary are exaggerated and unjustified?

Mr. Callaghan: I agree on the first part of my right hon. Friend's question.
On the second part, I am not so sure. There is a lot of public anxiety about the matter, and it is the duty of the authorities and of myself to take this

into account. There is no desire to impose censorship. If hon. Members saw the codes, I am sure that they would accept that they were perfectly sensible codes of behaviour. It is important that they should be lived up to. I am discussing how they can be lived up to.

Electoral Registers (Distribution)

Mr. Peter M. Jackson: asked the Secretary of State for the Home Department whether he will advise returning officers to restrict the distribution of the electoral register to bona fide political organisations.

Mr. Merlyn Rees: The difficulties of definition and enforcement which make it impracticable to amend the regulations in the sense proposed were explained in a debate on 26th March.

Mr. Jackson: I appreciate my hon. Friend's difficulties. He will recall that I was present on the occasion to which he refers and made a particular contribution. Is my right hon. Friend aware of the consequences of doing nothing? Certain parents are reluctant to enter their sons and daughters on the register, particularly when they are identified as being only 18 years old. Is it possible to withhold that information from the register and merely give it to the returning officer on polling day?

Mr. Rees: By its very nature the register is a public document. I should not like to have to add up how many of these documents are floating around in different houses as a result of the elections last week—perfectly reputably obtained by voluntary people in all political parties. This is the nature of the job. It is difficult to question someone about the source or sources from which they got the names.
Last year we discussed the definition of a political party. We saw in local elections that all kinds of people can classify themselves in this way and get the documents.

Sir G. Nabarro: Whatever the difficulties, does the hon. Gentleman realise that a large number of Members of this House, myself included, are inundated with complaints from constituents about documents, said to be obscene or pornographic in character, which are meticulously addressed to men and women of


all ages, notably including youngsters, the information for which could only have been derived from these documents? Will he examine the matter further?

Mr. Rees: According to a small investigation that I have had carried out, it is possible for some of these addresses to be obtained in other ways. There are private organisations that canvass for addresses. The hon. Gentleman might think that they come from the register, but nothing that he has said can prove it in a court of law. It is important to consider the matter when we investigate privacy, because pornographic literature coming through doors is a real problem. However, I do not agree that it can be tied to the electoral register.

Prisons

Mr. William Hamilton: asked the Secretary of State for the Home Department what plans he has for the sale of out-of-date prisons and the building of new maximum security establishments with the funds realised from such sales.

Mr. Callaghan: This idea has been considered many times. Even with legislation to revise the out-of-date valuations imposed by the Prison Act, 1877, the sale price of existing sites would fall far short of the cost of providing new prisons. But with nearly one-third of all prisoners now having to share cells it is not possible to give up any existing usable accommodation.

Mr. Hamilton: Is my right hon. Friend aware that my supplementary question is about to be based on some of the information that he has just given? What would be the increased cost of extra prison accommodation to overcome the problem of overcrowding which is fairly widespread throughout all prisons in the United Kingdom?

Mr. Callaghan: I cannot give that figure offhand. If I was asked to sell the sites and rebuild all the prisons, I think that the extra cost would probably be about £100 million. That is what makes the proposal put forward by the Leader of the Opposition so hopelessly unrealistic.

Mr. Hogg: Without intervening on the snide remark which fell last from the right hon. Gentleman, may I ask him whether the Government will consider amending

the 1877 Act which makes the sites in question the reversionary property of the local authorities, not of the central Government? Have they considered that possibility?

Mr. Callaghan: I am sorry that the right hon. and learned Gentleman thought that a snide remark. I thought that the Leader of the Opposition put it forward in good faith. I was replying in a similar way, but saying that it was a completely impracticable idea.
I have no proposals for amending the 1877 Act, because I think that parliamentary time could be better spent on other matters which are likely to be of more immediate practical effect.

London Cab Act, 1968

Mr. Arnold Shaw: asked the Secretary of State for the Home Department how many prosecutions to date have been instituted under Section 4 of the London Cab Act, 1968.

Mr. Merlyn Rees: Forty-three, Sir.

Mr. Shaw: Is my hon. Friend aware that there is still a good deal of disquiet in the trade that under this Section there has been continual evasion? Is he also aware of the disappointment that the publication of the Stamp Report has been so long delayed, considering it was promised by the end of 1969?

Mr. Rees: The publication of the Stamp Report is outside my right hon. Friend's control, but it will come later in the year. If my hon. Friend has any examples of evasion, I am sure that he will let us have them. Last year I received a deputation led by my hon. Friend the Member for Ilkeston (Mr. Raymond Fletcher). I had thought since that time, not just because of that, that matters had improved in this respect.

Fire Services (Reorganisation)

Mr. Judd: asked the Secretary of State for the Home Department whether he will make a statement on his plans for reorganisation of the fire services in England and Wales.

Mr. Rees: Not until my right hon. Friend has received and considered the report of the Departmental Committee on the Fire Service.

Mr. Judd: Does my hon. Friend agree that there is considerable uncertainty about the future amongst men of all ranks in the fire services? In view of their devoted service and heavy responsibilities, may I ask my hon. Friend to do everything possible to encourage the speediest possible publication of the Holroyd Report and of the Government's proposals for action on it?

Mr. Rees: I agree that there are devoted people in the fire services who, indeed, do not get enough praise. Publication of the Holroyd Report is not a matter over which my right hon. Friend has direct control, but we are hoping to receive it very soon.

Sir D. Renton: Will the hon. Gentleman give an undertaking to the House that that report will be published as soon as possible after the Home Secretary has received it?

Mr. Rees: I can give that undertaking. No one would be more pleased than my right hon. Friend to get this report, because we urgently want to look into the fire services.

Mr. Horner: Is my hon. Friend aware that the Holroyd Committee has taken nearly as long to deal with this single service as the Royal Commission took to deal with the whole of local government in England? With direct fire losses now running at over £100 million a year, is it any wonder that firemen are questioning whether the Department is dealing with the matter with the urgency that it demands?

Mr. Rees: When a Government Department and a right hon. Gentleman ask someone to produce a report, there is no direct control involved. I hope that my hon. Friend will take into account the fact that there most important matters to consider in the Fire Service and that there may be very good reasons why the report is taking so long.

Child Care Officers

Mr. Judd: asked the Secretary of State for the Home Department how many extra child care officers have been estimated as required by all local authorities in England and Wales in response to circular 187/1969 in order to cover adequately those provisions of the 1969

Children's and Young Persons Act relating to private fostering, abolition of approved school order, children under 10, children aged 10 and 11; and whether he will make a statement.

Mr. Merlyn Rees: On the basis of replies to circular 187/1969, I estimate that some 850 additional child care officers will be required by local authorities in England and Wales to cover work arising from the provisions to which my hon. Friend refers.

Mr. Judd: I thank my hon. Friend for that reply. Would he not agree that the estimates are rather larger than anticipated? Would he undertake to look closely at the adequacy of facilities for the training of child care officers and also the conditions of service as an inducement to potential recruits?

Mr. Rees: I am satisfied, after consultation with the local authority associations, that the officers required can be recruited. A similar increase in staff was required after the 1963 Act and there was no difficulty then. The annual output of training courses is now more than three times what it was in 1964.

Mr. Deedes: Can the hon. Gentleman really be so satisfied? Is he not aware that, as we warned at the time, there is a serious shortfall in the administrative needs set up by this Act, and that, not only among child care officers but in other spheres, a major crisis is developing over personnel?

Mr. Rees: We are satisfied that we can deal with this. Not the least of the reasons is, to repeat, that the training programme is very much higher than before. We believe that, with the phasing of the dates, we can meet this problem.

Prisoners (Visits by Children)

Mr. Milne: asked the Secretary of State for the Home Department if he will institute an inquiry into the question of the visits of children to parents in prison; and if he will make a statement.

Mr. Merlyn Rees: I am aware of my hon. Friend's concern about a recent case, by my right hon. Friend does not think that any general inquiry is needed.

Mr. Milne: Is my hon. Friend aware that that reply is disappointing, because


there should be consultation with children's departments about the methods adopted in the visiting of prisons, and that turning down a request for an inquiry is disappointing? Would he look at this again?

Mr. Rees: There was a problem in the case which my hon. Friend brought to our notice, but it was a particular case and it does not show a general need to review arrangements for children who have to visit prison.

Vandalism

Mr. Mapp: asked the Secretary of State for the Home Department what are the maximum penalties for offences of vandalism; whether he is satisfied that these penalties are adequate in present conditions; and if he will make a statement.

Mr. Callaghan: For offences of malicious damage to property generally, and tried on indictment, the maximum penalty is imprisonment for five years if the offence is committed at night and two years in other cases. For certain specific offences, longer sentences are available to the courts. The Law Commission is conducting a review of the law relating to malicious damage; the level of penalties will be re-examinated in the light of their recommendations.

Mr. Mapp: I thank my right hon. Friend for that reply, but for the more common offences of general vandalism, would he try to encourage the flexible use of attendance centres and, if necessary, detention centres for young people who are doing this sort of thing so frequently in our districts?

Mr. Callaghan: The flexibility of treatment and punishment in these matters needs a great deal of care and continued attention. I hope that we shall give it.

Police, Northumberland (Personal Radios Sets)

Mr. Milne: asked the Secretary of State for the Home Department if he will obtain a report from the Chief Constable as to how many personal radio sets were available to police officers in Northumberland in September, 1969, and the comparable figure for 1965.

Mr. Merlyn Rees: I am informed that the figure in September, 1969, was 518; the comparable figure in September, 1965. was 10.

Mr. Milne: Is my hon. Friend aware that we are very pleased with those figures, because they show the improved effectiveness of an already well-organised and efficient police force?

Mr. Rees: They also prove that anyone who looks at the question of law and order simply with the number of policemen in mind is ignoring the vast re-equipment which has taken place in the last five years.

European Economic Community (General Election Ballot Papers)

Mr. Arthur Lewis: asked the Secretary of State for the Home Department why he will not introduce legislation to change the electoral law to ensure that for the next General Election all ballot papers will contain in addition to the names of the candidates, a space for the electors to declare their support for the acceptance of entry into the Common Market without conditions, the rejection of entry into the Common Market on any conditions, and the entry into the Common Market on agreed and negotiated terms, respectively.

Mr. Callaghan: For the reasons given by my right hon. Friend the Prime Minister in answering Questions on 25th November, 1969.—[Vol. 792, c. 199–200.]

Mr. Lewis: Since all the political parties claim that they want to obtain the views of the people on this thorny subject, surely this is the easiest, cheapest and quickest way of doing so, since we will have the result, and the figures which all the parties want, in 12 months?

Mr. Callaghan: Yes, but my hon. Friend will remember that the opinion of the House was tested on this matter——

Mr. Lewis: Not that of the public.

Mr. Callaghan: —as recently as 10th December, as to whether there should be a referendum, and the House decided against it.

Mrs. Ewing: Is it not a fact that the Government will hold referenda, as in Gibraltar, only when they know two things—first, the answer that they will


get, and, second, that they will like the answer they get? Is it not the case that this Government know one of those two things—the answer which they will get—about the Common Market, but that they know that they will not like it and that that is why they will not have the referendum?

Mr. Callaghan: If the hon. Lady would care for a test-bed experiment in Scotland on the popularity of the Scottish Nationalist Party, that might be worthy of consideration.

Oral Answers to Questions — SOUTHERN AFRICA

Mr. Winnick: asked the Prime Minister what recent consultations he has had with other Heads of Governments regarding common policies towards southern Africa.

The Prime Minister (Mr. Harold Wilson): We are in regular contact through the diplomatic channel with other Governments on this as on other international issues.

Mr. Winnick: In view of the further inhuman apartheid law, was not the visit of the right hon. Gentleman the Chairman of the Conservative Party, when he begged for arms orders from the South African Government should his party win the election, degrading and completely against this country's traditions? Does my right hon. Friend appreciate that when the ill-advised cricket tour from South Africa takes place in the summer many people will wish to demonstrate in a non-violent way?

The Prime Minister: On the visit of the Chairman of the Conservative Party, I am in no way responsible for him. He was, I gather, a guest of the South African Foundation, and inquiries should be addressed either to that organisation or to the right hon. Gentleman himself. On the second part of my hon. Friend's question—I agree with his choice of the phrase "ill-advised" about the acceptance of this tour. No doubt there will be demonstrations. The whole House will hope that those demonstrations will be peaceful and not designed in any way to interfere with the play.

Mr. Ian Lloyd: Would not such consultations merely reaffirm that any policy

which rests on the twin pillars of hypocrisy and impotence merely demonstrates that it cannot support anything more significant than a fiasco?

The Prime Minister: I know the views of the hon. Member about all aspects in Southern Africa. I hope that he would feel able to support the proposition that this country stands for something in international affairs, particularly in racial questions, whether north or south of the Limpopo.

Mr. Faulds: Is my right hon. Friend aware that the Leader of the Opposition has not denied my accusations in The Guardian—[Laughter.]—the laugh may be on them—both that a Conservative emissary has been in touch with the rebel Smith and that Conservative pressure was put on the Nixon Administration to keep open its consulate in Salisbury?

The Prime Minister: I am not, of course, responsible for the right hon. Gentleman in these matters. He has to live with his own conscience about his whole Rhodesian attitude, but he has been asked in this House about statements in the Press by a very distinguished British journalist about the claims which were being made by Mr. Smith's party in the recent election about some of these contacts. I have no doubt that the right hon. Gentleman will take an early opportunity to deny these reports.

Mr. Longden: Will the right hon. Gentleman make public his view that the fact that citizens of this country do not approve of the laws of another country gives them no licence to break the laws of their own?

The Prime Minister: Of course that is the view of all of us, and of course I confirm what the hon. Gentleman says. This was made very plain inside and outside the House by my right hon. Friend the Home Secretary. I have said it myself in broadcasts, and I have said it here. Of course all of us can demonstrate our detestation of apartheid in peaceful ways in a peaceful country. There is no justification whatever for breaking the law or, indeed, for interfering with sport, however ill-judged the decision to invite the tour.

Oral Answers to Questions — CARIBBEAN ASSOCIATED STATES

Mr. Marten: asked the Prime Minister whether he will invite the Prime Ministers of the Caribbean Associated States to Great Britain for talks with him.

The Prime Minister: I have no plans to do so at present, Sir.

Mr. Marten: Is it not time to tell the Caribbean Prime Ministers, and indeed this House, why more than a year after the Government's venture in Anguilla there are still 84 policemen there? Would it not be wise to invoke the West Indies Act, which we passed in 1967 and which gave those islands the right to a referendum, if they want it, to change their constitution?

The Prime Minister: The police are there because they are needed there. As regards further consultation with Commonwealth Caribbean Governments about Anguilla, I hope the hon. Member will agree that it is right now to await the outcome of the work of the commission which followed consultation and which we and the St. Kitts Government appointed under the chairmanship of Sir Hugh Wooding. I am sure it is wise to wait for that.

Oral Answers to Questions — INDUSTRY (INFLUENZA EPIDEMICS)

Mr. Wyatt: asked the Prime Minister whether he will co-ordinate the activities of the Secretary of State for Social Services and the Secretary of State for Employment and Productivity in order to reduce the adverse effects of influenza epidemics upon industry.

The Prime Minister: I do not think there is a need for special steps to coordinate the activities of my right hon. Friends on this matter, Sir.

Mr. Wyatt: As the Prime Minister has been singularly unlucky in reducing the number of days lost by strikes, which have actually doubled in their rate since last June when the Government abandoned their trade union legislation, would it not be a good idea to make an effort in this field where it is generally accepted that vaccination could reduce the number

of days lost through 'flu' by about 30 per cent?

The Prime Minister: It is a fact, of course, that the number of days lost through illness far transcends the number lost through disputes, however we may deplore the number lost through disputes. The question of vaccination has been raised a number of times in this House. No doubt my hon. Friend would like to pursue it with the Secretary of State and other Ministers at the Department of Health and Social Security.

Mr. Orme: Is my right hon. Friend aware that some of us are pleased that the hon. Member for Bosworth (Mr. Wyatt) has moved from his perennial attack on trade unions in relation to strikes and is at least asking a Question about something which is costing industry 10 or 15 times more than strikes, which is illness? Surely this is what we should concentrate on within British industry, which is so vital at present?

The Prime Minister: I am sure that my hon. Friend's concern with influenza can only be healthy for all concerned. It is a fact, of course, that there is a very heavy loss of working days through illness of various kinds. The House is being asked to give approval to a very big step forward in relation to health and safety in industry.

Sir D. Renton: Can the Prime Minister say how many days industry lost through his getting "cold feet"?

The Prime Minister: I have answered questions about industrial relations many times, and as recently as last Tuesday. There is no question of "cold feet". I had said that if the T.U.C. would give binding agreements on these matters we would not proceed with our legislation. When the right hon. and learned Gentleman studies what has been achieved, particularly on the matter of inter-union disputes which right hon. Members opposite never began to solve and which their present proposals could only aggravate, he might be a little more satisfied.

Oral Answers to Questions — ROYAL COMMISSION ON POVERTY

Mr. Wyatt: asked the Prime Minister whether he will recommend the


appointment of a Royal Commission on Poverty.

The Prime Minister: I would refer my hon. Friend to my reply to a Question by my hon. Friend the Member for Heywood and Royton (Mr. Barnett) on 17th February.—[Vol. 796, c. 209–11.]

Mr. Wyatt: Why is the Prime Minister so complacent about this matter? Would it not be a very good thing to have an up-to-date definition of what poverty really is, including child poverty—[HON. MEMBERS: "You do not know what it is."]—plus some practical recommendations on how to alleviate it scientifically and financially in a way which might be adopted, rather than not adopted as most other Royal Commission reports are?

The Prime Minister: If the hon. Member has any new and up-to-date information from his own experience in the matter of poverty, of course I shall be ready to study it, but he will be aware of answers I have given on previous occasions. I think we have most of the facts necessary. The problem is dealing with them. The most recent action taken was in my right hon. Friend's Budget. My hon. Friend will have studied with great effect the Budget debates of last year, including the unfortunate pronouncements by the Leader of the Opposition. He will no doubt also have studied the statement by the Financial Secretary to the Treasury yesterday on the family survey and on the Child Poverty Action Group. I hope he will be very much impressed by what was said.

Lord Balniel: Is it not a pity that the Prime Minister regards this matter so complacently? In view of the fact that an objective, well-respected and non-political organisation is absolutely convinced that there is a growth in the amount of poverty in the country, and in view of the fact that the Budget does absolutely nothing to help, what steps are the Government to take?

The Prime Minister: I am prepared to take criticism from those concerned with these matters and share their impatience that we have not been able to do more, but I shall not take it from the Front Bench opposite. Right hon. Members had 13 years in which to deal with this

matter. They refused to deal with the widow's earnings rule, which we abolished. Our pensions record is very much better than theirs. There are the rate rebates for one million less-well-off householders, the repeal of the Rent Act, the abolition of National Assistance, and increase in family allowances. The hon. Member has only to look at the Opposition's proposals on raising council house rents and prices to see how much worse poverty would be under them.

Mr. Barnett: Although my right hon. Friend is absolutely right to dismiss the humbug of the hon. Member for Hertford (Lord Balniel), will he confirm that later this year and not too long away we shall see some alleviation of some aspects of poverty by an increase in supplementary benefits and an increase in the level at which they will start?

The Prime Minister: My hon. Friend will be aware that it has been a regular pattern, I believe under previous Governments as well as this one, that in one year there is an increase in the basic pension and the following year in supplementation benefits—which are very different from the National Assistance of the Conservatives. These are dealt with in alternate years. These matters are being considered as they were at this time in 1968 and in 1966, and, for all I know, in 1964.

Mr. Boyd-Carpenter: As the right hon. Gentleman referred to his Government's pensions record and compared it favourably with that of their predecessor, does he recall that the actual value of National Insurance benefits generally was increased by 50 per cent. under the late Administration and in respect of widows with young children by 100 per cent.? Will he tell the House whether his Government's proposals even approach that record?

The Prime Minister: Yes, Sir. As the right hon. Gentleman will know, there has been a very big increase in the basic rate under this Government in the last five years—by 20 per cent. in five years. He will also know, since he referred to widows, not only of the action taken—action which the previous Government refused to take—in respect of the 10s. widow, not only of the action I


referred to in the abolition of the earnings rule—which he steadfastly refused to get rid of, as did his Tory successors—but of the very big step forward in regard to earnings-related benefit, the lengthening of the period in the early months of widowhood and of the big stepping up of the rate for widows. The right hon. Gentleman would do well to remain silent.

Mr. Fernyhough: Would not my right hon. Friend agree that one of the best ways of tackling this problem of poverty would be the introduction of a wealth tax, to which my hon. Friend the Member for Bosworth (Mr. Wyatt) and hon. Members opposite would gladly subscribe, as this might give us £300 million a year, which would be a good start in tackling the problems about which hon. Members opposite are so much concerned now but about which they were not concerned when they had responsibility?

The Prime Minister: It is my impression that the question of the amendment of the law in relation to taxation is before the House, and that during the debate all hon. Members are free to put forward any suggestions they have for my right hon. Friend the Chancellor to consider. My right hon. Friend's own judgment of the situation was included in his Budget speech.

Sir R. Cary: The problem of child poverty has now become urgent and critical. Surely the Government should take special steps to deal with it?

The Prime Minister: I agree. After the first attack on the problem of widows, of supplementary benefits in place of National Assistance and the other things I have mentioned, poverty among large families came much more into the centre of the stage as the most urgent problem. That is why on two occasions we have increased family allowances, I am sure with the hon. Gentleman's support. The only thing that worries me is the way Tory canvassers, knowing that it is unpopular, go around getting the maximum political advantage out of our decision.

BUSINESS OF THE HOUSE

Mr. Heath: May I ask the Leader of the House whether he will state the business of the House for next week?

The Lord President of the Council and Leader of the House of Commons (Mr. Fred Peart): Yes, Sir. The business for next week will be as follows:
MONDAY, 20TH APRIL—Conclusion of the debate on the Budget Resolutions and the Economic Situation.
Motion on the Air Navigation (Noise Certification) Order.
TUESDAY, 21 ST APRIL—Supply [21ST ALLOTTED DAY]:
Debate on Post Office Charges and Services, which will arise on an Opposition Motion.
Motion on the Trade Marks (Customs) Regulations.
WEDNESDAY, 22ND APRIL—Recommittal Motion on the Education Bill.
Progress on the remaining stages of the Equal Pay (No. 2) Bill.
THURSDAY, 23RD APRIL—Second Reading of the National Health Service Contributions Bill, which it is hoped to obtain by about 7 o'clock.
Completion of the remaining stages of the Equal Pay (No. 2) Bill.
FRIDAY, 24TH APRIL—Private Members' Bills.
MONDAY, 27TH APRIL—Second Reading of the Construction Industry Contracts Bill.

Mr. Heath: On the Recommittal of the Education Bill on Wednesday, does not the right hon. Gentleman agree that the Government are in an unprecedented situation? The House cannot find a precedent for a Government, defeated on the operative Clause of a major Bill, just coming back to the House and asking for a recommital in this form.
Should not the Government have second thoughts and allow the Prime Minister to carry out his pledge that the grammar schools would be abolished only over his dead body? Would not it be a good idea now if the Leader of the House just dropped the Bill?

Mr. Peart: I am prepared to admit that an accident occurred, but I am sure that the right hon. Gentleman will vividly recall the time when, through the initiative of my right hon. Friend the Prime Minister, the party opposite suffered in Committee the temporary loss of an entire Finance Bill—and the right hon. Gentleman was then Deputy Chief Whip.

Mr. Peter Archer: Is my right hon. Friend aware that the 25th anniversary of the United Nations and the discussions arising from it will begin in June and that if we have not had a debate in the House on the subject by then the Government will have to make their contribution without the benefit of the view of the House?

Mr. Peart: I note what my hon. Friend says. I said this last week when I answered a similar question.

Mr. Peyton: Whilst I pay a very warm tribute to the right hon. Gentleman for his candour in admitting that a mistake occurred, does not he think that he should elaborate a little more and say how much time he thinks will be needed on Wednesday to dispose of this painful and embarrassing matter of the Education Bill?

Mr. Peart: I am still consulting the authorities of the House. As the hon. Gentleman will appreciate if he looks at Standing Order No. 52, dealing with Recommittal, it is rather restrictive. I am anxious that there should be adequate debate, and I hope that we shall have consultations on the matter through the usual channels.

Mr. Shinwell: Why have we heard nothing about the Merchant Shipping Bill, which is coming from the other place? Has my right hon. Friend taken into account the representations made by the seamen?

Mr. Peart: I am aware of those representations. I said last week that they were being considered. I cannot yet give a specific time for further consideration of the Bill by the House.

Dame Irene Ward: Has the right hon. Gentleman considered my Official Secrets Act 1911 (Amendment) Bill? Will he give an assurance that he will allow a debate on this very important matter,

which concerns the security of the country, so that we may discuss all the issues arising from an Act put on the Statute Book in 1911 and now somewhat out of date? A debate on the Bill would be very welcome, considering all the complexities and uncertainties of the present situation.

Mr. Peart: Not next week.

Mr. Lipton: May I, very unusually, support the representations of the hon. Member for Tynemouth (Dame Irene Ward)? The time has come for someone in the Government to look at the Official Secrets Act—if not next week perhaps the week after.

Mr. Peart: That is another matter.

Sir G. Nabarro: After the excessive dilatoriness of Treasury Ministers, when shall we have the long-awaited statement on the future of the 6d.? The Treasury has had the report from the Decimal Currency Board for nearly a month. Could not the House be told next week whether the 6d. is doomed or otherwise?

Mr. Peart: "Fairly soon", I think, is a reasonable answer.

Mr. Edward M. Taylor: Is the right hon. Gentleman aware that there is considerable anxiety and some confusion in Clydeside about recent developments in Upper Clyde Shipbuilders? Will he encourage the Minister of Technology to make a statement early next week, to clarify the position?

Mr. Peart: I will certainly call this to his attention.

Mr. Hugh Jenkins: In view of the conflicting reports about how Government policy on CS gas came to be changed and a conflict alleged between the Foreign Office and the Defence Department, does my right hon. Friend agree that it is right to have a debate on the subject as soon as possible? Can he arrange that, if not next week, the week after?

Mr. Peart: I cannot give that assurance.

Mr. Lubbock: Does the right hon. Gentleman recall that last week when I asked him about the Report from the Select Committee on the Declaration of Members' Interests he gave me a very sympathetic reply and said that the matter


could be debated in the near future? Has he come to any conclusion? Will he at least give us an assurance that it will be debated before the Whitsun Recess?

Mr. Peart: I cannot give an assurance on the specific time, but I did give a favourable reply last week.

Sir D. Renton: In view of the large number of matters that hon. Members on both sides would like to have discussed, but for which so far the right hon. Gentleman has not been able to find time, could he not find another way of dealing with the mistake the Government made in Committee on the Education Bill than taking up a whole day on the Floor of the House?

Mr. Peart: I had thought about other alternatives. We could have proceeded with the Bill in Committee still, though I know that there were problems here. We could have gone straight to the second and third Clauses and then reintroduced Clause 1 on Report. I believe that it was right to go about this in the way I have suggested.

Mr. William Hamilton: When does my right hon. Friend intend to introduce the Government's proposals on procedure in accordance with the recommendations of the Select Committee on Procedure?

Mr. Peart: I cannot give a precise date. I have tabled a Motion on the Ten-Minute Rule Motions, but I cannot say when we shall have a debate.

Sir F. Bennett: The Prime Minister has twice recently paid tribute to the sanctity of decisions reached democratically in the House by vote. Has the right hon. Gentleman consulted the Prime Minister, in the light of that assurance, about next Wednesday's programme? If so, what reply did he receive?

Mr. Peart: The Bill in question had a majority on Second Reading. The House decided in principle that it was a good thing to have an Education Bill to end selection.

Mr. Hector Hughes: Will my right hon. Friend reconsider the answer he gave my right hon. Friend the Member for Easington (Mr. Shinwell) about the Merchant Shipping Bill, which is very important? The seamen want it, their

union wants it, and it is very urgent that it should be considered by the House when it comes from the other place.

Mr. Peart: I accept that, as soon as progress is made, this very important Bill, which I am sure all hon. Members will welcome, will come before the House.

Mr. Montgomery: As the Government on Tuesday lost the vital first Clause in the Education Bill, which is the operative Clause, because of the lack of enthusiasm of Labour Members, does not the right hon. Gentleman think that instead of recommitting the Bill to the House it would be much better to short-circuit this piece of legislation?

Mr. Peart: The hon. Gentleman is only repeating previous questions. I have said what I think is the right way to proceed.

Mr. Russell Kerr: In view of the overwhelmingly favourable views of the workers affected, will my right hon. Friend urge on my right hon. Friend the President of the Board of Trade the urgent importance of approving the merger of B.U.A. and B.O.A.C.

Mr. Peart: I will call what my hon. Friend has said to the attention of my right hon. Friend.

Sir Ian Orr-Ewing: Does not the defeat on the Education Bill in Committee give the right hon. Gentleman one last chance to absolve the conscience of the Government, as the Prime Minister pledged that the grammar schools would be condemned only over his dead body? Is not this an opportunity to forget the Bill and absolve a portion of his conscience?

Mr. Peart: The hon. Gentleman is trying to make a political point about the content of the Bill. The House decided in principle that it was a good thing to have a Bill on comprehensive education. I believe that the way I have outlined is the right way to proceed.

Mr. McMaster: In view of the serious state of the shipbuilding and ship-repairing industry in Great Britain and Northern Ireland, and heavy unemployment threatened both on the Upper Clyde and in Belfast, could the right hon. Gentleman arrange for a debate rather than just a statement on the subject at an early date?

Mr. Peart: I cannot give an assurance that there will be an early debate.

Mr. Maudling: The hon. Gentleman referred to what happened in Committee on the Education Bill as an accident. Is he aware that four similar, if minor, accidents occurred this morning in other Standing Committees? As Miinsters are obviously getting exhausted by their programme, should not they revise it?

Mr. Peart: I do not think that that calls for a serious answer.

Mr. St. John-Stevas: Can the right hon. Gentleman give us an assurance that the House as a whole will not suffer for the incompetence of Government supporters in the Committee on the Education Bill by having our Whitsun Recess reduced?

Mr. Peart: I cannot give that assurance, much as I should like to.

Sir A. V. Harvey: Could not the right hon. Gentleman get out of the whole matter quite simply, now that we have had a rather dreary Budget, by asking the Prime Minister to make an early statement on the next General Election, and get on with it?

Mr. Peart: Not next week.

Mr. Lane: In view of the right hon. Gentleman's sympathetic undertaking last Thursday, why can he not tell us now

on which day next week one of his right hon. Friends will make a statement about the Winter Emergencies Committee, particularly on solid smokeless fuel supplies?

Mr. Peart: I said that I will look into the question. If the hon. Gentleman reads in HANSARD the reply my right hon. Friend the Prime Minister was to have given orally if the Question had been reached, I think that he will see that it is a very full answer.

BALLOT FOR NOTICES OF MOTIONS FOR MONDAY 4TH MAY

Members successful in the Ballot were:

Mr. Peter Fry.
Mr. E. L. Mallalieu.
Mr. Michael Barnes.

BILL PRESENTED

CONSTRUCTION INDUSTRY CONTRACTS

Mr. John Silkin presented a Bill to make provision for the registration of persons undertaking work in the construction industry; to provide for the charging of a levy in respect of payments for such work where contractors are not registered; and for connected purposes: And the same was read the first time; and ordered to be read a Second time tomorrow and to be printed. [Bill 147.]

Orders of the Day — WAYS AND MEANS

Order read for resuming adjourned debate on Question [14th April].

AMENDMENT OF THE LAW

That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance, so, however, that this Resolution shall not extend to making—

(1) amendments of the enactments relating to purchase tax so as to give relief from tax, other than amendments making the same provision for chargeable goods of whatever description, or for all goods to which any of the several rates of tax at present applies;
(2) amendments of the enactments relating to selective employment tax so as to give relief from tax—

(a) by way of exemption from, or a reduction in the rate of, tax except in respect of all persons of the same descriptions relevant for determining the rate of the employer's flat-rate contribution with which the tax is combined, whether that contribution is under the National Insurance Acts or under the corresponding enactments in Northern Ireland; or
(b) by way of providing for payments to employers of an amount equal to the whole or a specified part of the tax paid if the proposed provision—

(i) is in respect of employers in, or at establishments in, part only of Great Britain; or
(ii) extends to employers in, or at establishments in, Northern Ireland; or
(iii) is in respect of all persons in any particular description of employment in all parts of Great Britain, and relief in respect of the whole of the tax paid could be given in respect of that description of employment by an order under section 9(1)(a) of the Selective Employment Payments Act 1966 adding that description of employment to the employments to which section 1 or 2 of that Act applies; or


(c) by adding or removing any employer to or from the employers to whom section 3 of that Act applies, or
(d) by amending the provisions of Schedule 1 or Schedule 2 to that Act;


(3) amendments of the provisions of the Customs (Import Deposits) Act 1968 so as to give relief from the import deposits required by those provisions to be paid, other than amendments making the same provision for all goods on which such deposits are so required to be paid;
(4) provisions relating to betterment levy.

Question again proposed.

BUDGET RESOLUTIONS AND ECONOMIC SITUATION

3.45 p.m.

The President of the Board of Trade (Mr. Roy Mason): I thought that during the course of the general debate on the Budget I would take this opportunity of spelling out our export record in more detail, how this was achieved, and give the House an idea of the changing trade pattern in the world and say where, if we are to be successful in consolidating these hard-won gains, we must concentrate in future years.
First, our export record. During the second half of last year our balance of payments surplus was running at an annual rate of £740 million a year. With the March trade figures published last Tuesday—which, incidentally, included a record export figure of £671 million—we can now see that there was a surplus on visible trade in the first quarter of the year of £36 million, which is slightly better even than the two preceding quarters.
In 1969, we had a current account surplus of £366 million—the best surplus since the war—compared with 1964, when there was a deficit on current account of £393 million—the worst year since the war. If one looks at the last six months' figures, October, 1969, to March, we have had a surplus on our visible trade of £64 million. This is a period of successful selling in the world markets unparalleled in Britain's trading history.
Statistics often sound lifeless and disembodied. But these are no abstract figures. They are a tribute to hard work by British work people and managers and export salesmen, who succeeded in selling, from this allegedly impoverished and strike-bound island, more goods in the markets of the world than ever before in our history. We are now selling well on the way to £8,000 million worth of exports per year, or £30 million every working day.
I shall have something more to say later about the changing pattern these figures point to in our visible trade and about our invisible earnings. Let us look for a moment at what made this dramatic change possible, because it was not just hard work alone but a fundamental change in the competitive position of British industry. This goes back


to the two major industrial aims we set ourselves when the Government came into office in 1964—a steady and sustained increase in investment and a major restructuring of industry.
On this question of investment, we hear a lot from hon. Members opposite about the wasteful nature of investment grants. Our aim in changing from the old investment allowances to grants was not only to promote investment, but to reduce the fluctuations in its level, to get the right sort of investment, to spur technical advance and to help new firms setting up. What does the record show?
In 1961, investment in manufacturing industry amounted to £1,301 million. By 1963, it had fallen to £1,055 million—a decline in real terms of 19 per cent. And in 1964 it reached only £1,190 million, still well down on 1961. Since 1964, investment has risen—for four years running it was in excess of £1,300 million and last year it reached well over £1,400 million—an increase compared with 1964 of 20 per cent. in real terms, with plant and machinery showing a 24 per cent. increase.

Sir Ian Orr-Ewing: I think that the right hon. Gentleman has got it wrong. It real terms, it rose from £1,309 to £1,428, as shown in Table 13 of his own White Paper. This is not a 20 per cent. increase by any stretch of the imagination.

Mr. Mason: I am sorry to have to disagree with the hon. Gentleman. I have tried to spell out the figures from 1961 to 1964 to give the proper totals. I do not know what table the hon. Gentleman is referring to. I have tried to spell out the real totals, in real terms, to show that there has been a noticeable increase in investments. It is on this steady sustained increase in investment that our competitive position—and the successful attack now being mounted on world markets—depends.
I come to restructuring. One thing which it seemed to us in 1964 to be badly needed was the formation by merger of larger industrial units, of the extension of proved dynamic management to wider fields. Of course, I recognise that size is no panacea. There are dangers as well as advantages. But if we are to hold our own in world markets

—above all, if we are to benefit and not lose from a wider European market—we must in some fields at least have industrial units of a size and with the financial resources able to stand up to the world's largest.
Nearly half the manufacturing output of the United States and Western Europe is in industries which rely heavily on advanced technologies—engineering, electrical and electronics, and chemicals. But here, we in Britain and Europe suffer from three relative disadvantages—the massive support given in the United States by Government expenditure on research and development, the fact that national markets in Europe are too small to generate the financial and other resources needed to compete with the United States, and the fact that in the United Kingdom as well as the rest of Europe we suffer from lack of companies of a sufficient size to be able to command R and D resources on the scale required to compete effectively with the United States.
It was with these thoughts in mind that the Government set up the Industrial Reorganisation Corporation. I know that the I.R.C. is not popular with many hon. Gentlemen opposite. There are even some who would like to see it abolished and others who would like to see its wings clipped. But while we wait for these conflicting cries to sort themselves out, can any hon. Member opposite seriously argue that the I.R.C. has made a major contribution to the strengthening and restructuring of industry? How confidently could we expect British-owned car manufacturing to survive if it had not been for the setting up, with I.R.C. encouragement and help, of B.L.M.C.? How quickly would the merger into one corporation of continental size of the three major electrical companies have come about without the help of the I.R.C.? What about the help the I.R.C. has given in rationalising the manufacture of scientific instruments and ball bearings?

Mr. Patrick Jenkin: It is an important point, as to whether the prospective advantages which were looked for in some of these mergers promoted by the I.R.C. have ever been obtained. There has been a great deal of talk about the advantages of size, but has this been followed up? So far as I know, they have never been proved.

Mr. Mason: There are disadvantages in size as well as advantages. The I.R.C. has been considering how many of the industries which are complementary to and competing against each other can develop their R and D, become of continental size, and compete against America as well as becoming a major factor if we enter Europe. Some of the examples I have quoted are self-evident. Of two things I am certain. The first is that in the second half of the 1960s more was done to reshape and rationalise and reinvigorate industry than in any previous comparable period since the Industrial Revolution. The second is, I think, that future economic historians will give a notable part of the credit for this to the I.R.C. which this Government established.
I have mentioned domestic investment and the restructuring of industry. But there is a third factor in the strengthening of our international competitive position. I refer to overseas investment by British firms. Here I think there has been a misconception of the Government's policy and, as a result, a great deal of misdirected criticism. The purpose of the tightening in 1965 of the control on overseas investments, and of certain subsequent measures such as the introduction of the voluntary programme in 1966, was not to cut down overseas investment, but to cut down the financing of investment in ways which involved a loss of reserves.
Let me demonstrate with only three figures how successful this policy has been. In 1964, private direct investment overseas totalled £263 million. In 1968, the figure was £410 million—an increase of over 50 per cent., a figure far exceeding the uplift to sterling values given by devaluation. In 1969, we estimate the figure at £500 million, a further increase of over 20 per cent. So we have been adding to our overseas assets at a rapid rate. But our controls have ensured that this has been financed without damage to the national interest.
All these changes in our industrial situation are giving us a more efficient, more competitive industry, and, above all, an industry which has been able to seize the advantage given by devaluation to translate a continuing deficit in our international payments, with ever-mounting overseas debts and with domestic economic management domin-

ated by successive trade and financial crises, into a surplus of a size which many of us, even a year ago, would hardly have thought possible.
So, 1969 was a really excellent year. The visible trade deficit averaging £25 million a month in the first half of that year was transformed by the second half to a surplus of £8 million a month. Whereas the rise in imports was comparatively modest, exports reached a level of 14 per cent. higher in value and 10 per cent. in volume than in the previous year. This was the second year running that exports had shown a big increase. After we have made allowance for the effect of the dock strikes at the end of 1967, it is clear that exports were growing in 1968 at much the same rate as in 1969—that is an increase in volume of some 10 per cent.
To achieve increases of this order in two successive years really is by past standards a remarkable achievement. It reflects the greatest possible credit on the efforts of all engaged in the export drive. It says something for the basic policy which the Government have persisted in without—perhaps I could say, in passing—overwhelming support from the right hon. Gentleman the Member for Enfield, West (Mr. Iain Macleod), who is not paying particular attention to what I am saying, because he has been one of the guilty men who has not been giving any support during the period. We always anticipated that there would be a difficult period before the policy began to pay off.
There is a tendency on the part of some commentators and some right hon. Gentlemen opposite to write off Government policy as a factor on the grounds that this achievement was simply a reflection of a great boom in world trade. Certainly, world trade was very buoyant; and even under what I may call the old regime we could have expected a sizeable increase in our exports. But, as an analysis of our performance in relation to world trade will show, not an increase anything like what we in fact achieved.
The House will, I hope, bear with me if, to demonstrate this point, I have to quote some figures which will be new. These show for certain recent years of fast growth in world trade the rate of growth in the volume of United Kingdom exports of manufactures expressed as a


percentage of growth in volume of world trade. In 1960, the figure was 38 per cent. In 1964, the last year when we had a different Administration, it was 33 per cent. That is, in those years while our exports expanded, the expansion was much slower than that of world trade; or to put it another way, our share in world trade fell significantly.
But for 1969 the corresponding figure was above 90 per cent. That is, our exports increased nearly as much as world trade as a whole; and our share was broadly held.
This is a complete transformation of experience, a complete reversal of past trends. This cannot be due to world trade alone. We are talking about an improvement in our performance in relation to world trade. This is the proof both of devaluation and of the reshaping and reinvigoration of the British economy which Government policy has played a vital rôle in bringing about.
I have spoken so far mainly about 1968 and 1969. We are not yet far advanced into 1970. The figures, which I have already mentioned, for the first quarter, suggest that this will be a good year too. It is true that world trade is likely to grow less rapidly than in the last two years; and while import prices should not rise against us as fast as last year, the somewhat higher rate of growth in the domestic economy will lead to a rather sharper rate of increase in the volume of imports.
As against this, the prospects for world trade, if less outstanding than in the last two years, are still well up to the trend of the last decade, and the opportunities for our exporters are there. Our visible trade has shown a marked improvement and the underlying trends and future prospects for exports and the balance of trade continue to look favourable. Export orders, in particular, are still continuing to grow and the competitive advantage conferred by devaluation continues as an important factor in the general situation.
The state of order books for engineering exports, with orders still coming in 15 per cent. faster than current deliveries and orders on hand 30 per cent. higher than a year ago, are one indication that the opportunities will be taken; and the rather easier credit conditions which will

result from the cut in Bank Rate and the expansion in domestic credit forecast by my right hon. Friend the Chancellor of the Exchequer in his Budget statement will reduce the problems that exporters have on that front.
So far, in talking about the transformation of our trading position, I have concentrated on the total balance. In the short term this is what matters. But let us look ahead for a moment—as we must in planning our policy for exports—and see what is happening within the totals, how the pattern of our export markets is changing. I think that the House knows the way in which the pattern is changing. Less reliance on the old traditional markets in the Commonwealth and increasing concentration on the faster growing industrial markets in Europe and North America.
But not everyone appreciates how far and how fast the transformation is going. Let me demonstrate this by picking three years: two in the past; and one in the future. I begin with 1958, the last year before the present European economic pattern began to take shape, the year before the European Economic Community began to make its tariff changes, and when E.F.T.A. was as yet unborn. In that year, getting on to half—38 per cent.—of our exports still went to the Commonwealth, 28 per cent. to the E.E.C. countries, E.F.T.A. and the Irish Republic and 9 per cent. to the United States. Japan with 0·6 per cent. of our exports scarcely counted as a market. By 1969, the pattern had changed quite sharply. The figure for Western Europe had risen to nearly 40 per cent. The proportion going to the United States had risen from 9·2 per cent. to 12·4 per cent. Japan took 1·8 per cent. of our exports—still a small share—but a threefold increase over the 11 years. On the other hand, our exports to the Commonwealth had fallen to 26 per cent. of the total. So the pattern, therefore, of our export trade is changing and the change is quite striking.
Now let us look forward. What will the position be in the second half of the 1970s? The uncertainties are great. But we must assume that the trend of the last decade—based on the faster growth of the industrialised economies—will continue. And if, as I hope, we join an enlarged Community our trade


with Western Europe will be given a powerful additional impetus. Between 1958 and 1968 our exports to the Community rose two and a half times.

Mr. Stanley Orme: Without our being in.

Mr. Mason: Over the same period, trade within the Community rose by no less than four times. No one, on this basis, can predict to the last percentage point what our pattern of trade will be in the mid-seventies. But the share of our partners in Western Europe of our total exports would probably be getting on to half. The share of the Commonwealth will have dipped well below a fifth. Our exports to the United States—as to Japan—will no doubt have risen.
Two-thirds or more of our export trade will be with the highly industrialised countries of Western Europe and North America.

Mr. Robert Sheldon: Would my right hon. Friend agree that the declining proportion to the Commonwealth is not due to the slowing down of imports to those countries, but rather that their economies have been growing quite well, but that they have replaced us as the main source of supply and that it is this which makes the Common Market countries and North America so important because there has been this fundamental change in the relationship?

Mr. Mason: I think that it is a combination of two factors. I agree partly with what my hon. Friend says.
First, North America, Canada and Europe are better able, because of their development and the growth in their economies, to be able to take our sophisticated manufactures, of which we produce a lot. This is not true of many Commonwealth countries.
Second, so far as South-East Asia and part of the Commonwealth is concerned, there are other forms of economic groupings taking place such as the Association of South-East Asian Nations. This is quite natural and part of the changing pattern of trade and I tried to recognise this, though not in so much detail, during my remarks.
These are dramatic changes over a period of less than 20 years. They will mean changes not only in markets, but

in the types of goods sold and in the technique of export selling, And we for our part have to look continually at the way our export services are geared to the demand and the distribution of our effort in personnel and money between different markets.
The House already knows of the reorganisation which has been carried out of the overseas side of the Board of Trade. Alongside the work of B.N.E.C., the strengthening of the commercial side of Her Majesty's Diplomatic Service, and the strengthening of our regional organisation which is also in progress, this is enabling us to give a more detailed, more personal, and more effective service to our exporters. The most dramatic sign of this is the computerised information service which, from June, will be sending to exporters daily exactly that type of information, and only that type of information, which they have registered as meeting their individual needs.
That is the kind of thing I am talking about when I say that we are giving a detailed, personal and effective service. The interest shown by exporters in the new information service—we have had positive inquiries from nearly 5,000 firms, of whom nearly 2,500 have already registered—shows that it meets the needs of the time.
We have also been re-examining our services to small exporters. They are specially dependent on the services of agents overseas—and good agents are increasingly difficult to find. We therefore have in hand, with a variety of our overseas posts, an intensive examination of the service we provide of finding agents overseas, and intend that in some months' time this service will be improved.
Another side of our services aimed at small exporters is our Group Export Representation Unit. This brings together a group of five or six small exporters selling complementary, not competitive, products, who could benefit from employing a single representative overseas. It guides them in considering their markets and marketing and in the appointment of a representative for the group.
I have myself been out to examine the variety of problems thrown up by different markets, and to assess the success


of the services we provide. We put a lot of effort into the organisation of promotional events—particularly in the form of trade drives—a linking of a number and variety of promotional events in a country or territory within a given period. I have visited the trade drive now under way in Finland and I shall be there again in September for the International Trade Fair. A week or two ago I was in California, inspecting the preparations for the trade drive there. This is the kind of technique we judge suitable for the developed markets of North America and Western Europe.
Trade fairs and exhibitions, however, are not so frequently appropriate to the developing country markets of Asia—for example, Malaysia, Singapore, Thailand and the Philippines, which I visited in January. Here it is mainly a question of ensuring that there are adequate selling representatives, that credit terms are right, and that delivery dates are kept so that follow-up orders are gained.
Conditions in Eastern Europe are different entirely. Trade is very often in complete industrial plants and in other major capital propects. Here credit terms and a willingness to co-operate with local producers in joint arrangements are often crucial. Last month. I paid an official visit to Romania, where British exports have trebled in three years. I was able to get to know some of their Ministers. This is important in centrally planned economies. And I hope that this type of visit will also be of some help to our exporters. I hope to visit Hungary next month and perhaps to go to other Eastern European countries later in the year.
E.C.G.D. has continued to increase its insurance coverage for British exports and to expand its facilities In the financial year just ended, it insured business totalling a record £2,696 million and is covering about one-third of total British exports. This gives an idea of the type and scale of activity which I and my Department are continually engaged in to support the people who actually make and sell abroad.
Of course, support means spending money, and the cost per annum increases as these activities, in response to exporters' demands, increase. For example, expenditure on direct support to exporters

—joint ventures at trade fairs, overseas missions, and so on—has risen from about £¾ million in 1963–64 to about £7 million during the current year. Even so, the total cost, which is about £25 million when we include all staff costs and all forms of expenditure, is minute in comparison with export earnings of well over £7,000 million per annum, especially as the services provided to exporters are well used and widely appreciated.
I have spoken so far about our policies for promoting visible exports. I want now to turn to the other and, sometimes, I recognise, unfairly neglected element in our earnings on current account, exports of invisibles. Invisibles have made a major contribution to the improvement in our position. Net invisible earnings, which, between 1960 and 1966, had been between £113 million and £214 million, rose to £230 million in 1967, £334 million in 1968 and a record figure of £524 million in 1969—very substantial increases even taking into account devaluation. In this last year, there were particularly striking improvements in earnings from overseas visitors—26 per cent. higher than 1968—and from civil aviation and financial services, which rose by 21 per cent. and 13 per cent. respectively.
For many reasons, because trade in goods accounts for the major part—over 60 per cent.—of our current overseas earnings, and because the statistics relating to them are available at more frequent intervals, public attention has tended to concentrate on visible exports and to disregard the invisible sector. This is a mistake which I wanted to make sure was not reflected in our policy. One of the first things I did when I became President of the Board of Trade was to put in hand a thorough review of our policy on the promotion of invisible exports. In this, I have been greatly helped by the Committee on Invisible Exports under the chairmanship of Mr. Cyril Kleinwort. I met this committee for the first time at the beginning of the year, and I hope that the useful exchange of views we had on that occasion will have been the beginning of a continuing and fruitful contact.
In our review of this matter, I have had particular regard to those recommendations in the 1967 Report of the original Committee on Invisible Exports which involved possible action by Her Majesty's


Government. This provided a good framework. The review is not yet completed, but we have got to the point where I can give the House an interim report.
One set of problems to which the report drew attention related to the inadequacy of statistics about our invisible earnings. These can, perhaps, never be as precise, as accurate, and as frequently available as statistics about our visible exports. One only has to think for a moment about the different nature of the trades involved to see why this is so. None the less, a good deal has been done to improve the statistical basis. To mention some examples only, an analysis has been published of world trade in invisibles. My Department is discussing with the export houses the contribution that they can make. We have been able to arrange to obtain new quarterly figures through the Chamber of Shipping. We have added a reference to invisible earnings to the monthly Press release on the trade figures so as to put our trade performance in the context of our total performance on current account.
Another set of the report's recommendations related to the services which the Government make available to our invisible exporters both overseas, through our overseas posts, and, through the export promotion branch of the Board of Trade and our regional offices, at home. These export promotion facilities are, in principle, available to visible and invisible exporters alike. However, they have, perhaps, been considered more as meeting the needs of visible exporters, and I thought it useful, therefore, to set in train a thorough review of the arrangements from the particular point of view of the invisible exporter.
This review, in which we have had invaluable help from the Committee on Invisible Exports, is not yet complete, but it has already thrown up some areas in which we can do more to help our exporters. I am sure that the final result will be the provision of a still better service both at home and overseas.
One of the committee's recommendations was, as will be remembered, that the Government should significantly increase their financial help to the hotel industry. This, and more, we have done with the Development of Tourism Act, 1969, the first piece of legislation specifi-

cally designed to assist the development of tourism in this country. Hon. Members have only to look around to see how much hotel development is now in progress. The chairman of the English Tourist Board recently revealed that, if all the applications so far received by his board were approved, it would add 30,000 bedrooms to the country's stock of accommodation.
Last year, our earnings from overseas visitors rose by 26 per cent. to £355 million, and I have every confidence, because of the changes and improvements which we are making at home, that this contribution to the balance of payments will continue to grow.

Mr. Nicholas Ridley: On the question of invisibles, will the right hon. Gentleman say what the Government intend to do to meet the strong recommendations of the Committee on Invisible Exports about taxation and other restrictions which have been affecting overseas investment?

Mr. Mason: Some of them are still under review. On the one about which the hon. Gentleman is thinking principally, I imagine, and with which he has been concerned in recent weeks, the selective employment tax, I have nothing to add to what I have said in the House about it before. I do not think that it would be wise at this stage even to discuss the matter in relation to invisibles, when they have done, in spite of it, so remarkably well. I think that that is enough.
The report which I have been able to give the House has shown that our visible and invisible trade has rapidly increased, and that, while the pattern of our trade has changed, we have been well able to match that pace of change.
Last year, the right hon. Gentleman the Member for Enfield, West said that the Budget was "the defeatist Budget of a defeated Government". I hope that the facts I have unfolded to the House this afternoon have been able to tell a different tale. For the real message and the real significance of the dramatic turn-round in our overseas trade is that this reflects a fundamental change in the competitive position of the economy.
The policies we have had to pursue have been unpopular and hard—devaluation, restraint of home demand to leave


room for rising investment, the restructuring of industry, control of the method of financing overseas investment, and so on. All these got us more brickbats than cheers. But now our own people and, indeed, the world can see that they are beginning to pay off. It means that we can embark on the negotiations soon to start in Brussels from a position not of weakness, but of strength, ready to gain the great prizes of prosperity and rapid growth which a unified Europe offers to all, but remaining what we have traditionally been, a great world trading Power.

4.19 p.m.

Mr. Patrick Jerkin: Having listened to the President of the Board of Trade—and judging by the close attention which he was giving to his right hon. Friend's speech, I imagine that the Chancellor may take the same view—I can only say that that speech would have looked much better in the pages of the Board of Trade Journal. It seemed to me that it had nothing to offer the House which we do not read week in and week out in that publication. Moreover, the right hon. Gentleman would have had the consolation of knowing that he could have his own picture firmly on the front of the issue when circulated.
I have sat through a number of speeches by Presidents of the Board of Trade who have justifiably extolled the virtues of the Department, but I cannot help feeling that this is not what the House and the Budget debate are for. However, I will mention some of the points to which the right hon. Gentleman referred.
I turn, first, to invisibles. I still find it difficult to get used to the sight and sound of Socialist Ministers extolling, with paeans of praise, the advantage which comes to the country from the City of London and our trade in invisibles. I cannot but remember that, not long ago, the Prime Minister stood up in this Chamber and dismissed them all, with his usual felicity of expression, by saying that they are "those who use money to make money". If words stood alone, I suppose that they could endure, because no institution has been safe until it has been subjected to the Prime Minister's

talent for invective. But not only the words but the policies of the Government have in one way or another hampered the efforts of our invisible traders to bring returns to this country.
The right hon. Gentleman the Chief Secretary to the Treasury recalls the debates we have had over and over again on the long-term fiscal disincentives imposed on overseas investment—permanent disincentives through corporation tax and the renegotiation of several dozen double taxation conventions. There has also been the 25 per cent. surrender rule. This was originally introduced as a crisis measure, but now, however, there is no sign of its being anything other than a permanent disincentive to those who have to operate portfolios of foreign investment.
I am sorry that the hon. Member for Lewisham, West (Mr. Dickens) is not here, because yesterday he took a distinctive and typically Socialist view about the place of overseas investment in the economy. I intervened at one point in his speech to query, because I found it difficult to believe, that he was entirely dismissing the contribution to which the Chancellor himself, in his Budget statement, had drawn attention—the contribution in the form of invisibles to our balance of payments.
As I say, I am sorry that the hon. Gentleman is not here, because it would have been good for his education to have drawn his attention to Table 15 of the White Paper. This shows that the private sector interest and dividends, which amounted to a net inflow of £513 million in 1964, had risen to £801 million in 1969. During the same period, the net outflow in the public sector, which was £116 million in 1964, had risen to £329 million in 1969. Public sector credits have been virtually unchanged through this period—about £42 million—whereas public sector debits have risen from £159 million in 1964 to £370 million in 1969.
It is important to look at the definition of these debits at the foot of page 34, which gives the nature of the charges on the balance of payments which arise on Government account. It says:
Public sector debits comprise interest paid on inter-governmental loans and on overseas holdings of United Kingdom government stock and Treasury bills; interest paid on official currency liabilities; interest paid by United


Kingdom public corporations and local authorities; and charges paid on drawings from the International Monetary Fund.
These are the amounts which have increased two-and-a-half times in the last five years. I invite the House to reflect on the fact that, if it were not for the growth in the private inflow, the Chancellor's balance of payments surplus would begin to look a bit silly.
We cannot assume that this will continue. Overspill relief is tapering off. The tax disadvantages of the Finance Act, 1965, are beginning to bite. I must, therefore, express the gravest disappointment that the Chancellor, in his Budget, could offer no relief whatever, either from those tax disadvantages or from the present stringent controls on overseas investment.
We utterly reject the view, expressed yesterday by the hon. Member for Lewisham, West, that overseas investment is against our interests. The United Kingdom is not rich in raw materials. It is essential that British companies should invest heavily in exploiting the mineral resources of those countries which are so rich. It is essential for us to establish local manufacture, if we are to protect our markets in many of the developing countries. If we lose out in this sector, we do so at our peril.
It is no use the President of the Board of Trade coming here and boasting proudly of the results of Government policy and the contribution made by invisibles in dividends and interest from overseas if the Government are not prepared to do anything about it. The people involved in these transactions are entitled to look for some encouragement, and they have got none from this Budget.
So far, I have talked about overseas investment, but invisibles comprise a great deal more than that. Table 18 of the White Paper shows that invisibles include shipping, aviation, tourism and travel, banking, insurance brokerage, etc. Happily, they all moved ahead strongly after devaluation substantially altered the terms of trade between them and their principal competitors overseas. Net inflows, which were £161 million in 1964, rose to £509 million in 1969—small thanks to anything the Government have done.
My hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley)

rightly made the point that every single employee in every single United Kingdom establishment in this sector, with the exception of a few hotels in various parts of the country, is subject to selective employment tax, introduced in 1966 and increased twice since then. This represents a very heavy burden on service industries whose overseas earnings are so substantial, and moreover, with virtually no import content in them at all.
I say a word of warning to the Chancellor, and perhaps I may have his attention here, even if his right hon. Friend the President of the Board of Trade could not attract it. If the Chancellor fulfils his intention and accepts Professor Reddaway's recommendation of going over to an earnings-related system of calculating S.E.T., this will impose a very substantial additional burden on the invisibles sector, particularly in the financial services, insurance, and so on, where, inevitably, there is a much higher ratio of higher paid employees than there is in many of the other service trades.
No single instance demonstrates the folly of S.E.T. more clearly than its impact on invisible trades. If we had, instead of S.E.T., a value-added tax which was remittable on overseas earnings in all these sectors, the switch could offer a very useful stimulus indeed to increasing the nation's earnings from this source.
The President of the Board of Trade had a good deal to say about the visible surplus. He took a somewhat different tone today from that which he took when he addressed the dinner of the Finance Houses Association a couple of weeks ago. Today, he took a very much more optimistic view, perhaps for the benefit of his hon. Friends, than he was prepared to take to his audience on 19th March. I remind him of what he said then:
The huge improvement in 1969 took place against a set of circumstances that were indeed favourable to our trade. The growth of world trade as a whole, and hence demand for our exports, was at an almost unprecedented rate… But we must face it—few of these factors will be so strongly in our favour this year. It would therefore be quite wrong to expect the balance to continue to improve so strongly this year as last.
That, as I have said, is a different tone from the speech of the right hon. Gentleman today and, indeed, a different


attitude from that adopted by the Chancellor in his television broadcast on Tuesday.
The President of the Board of Trade also raised the question of investment. I am sorry that the Financial Secretary to the Treasury is not here, because he made a number of egregious remarks yesterday about this matter. He quoted some figures for the increase in investment, and some of them, perhaps in a different form, have been repeated today by the President of the Board of Trade.
One thing which the Financial Secretary said was that private investment was up to what had been forecast last year. I must ask the President of the Board of Trade to look at Table 1 in the Red Book. Private fixed investment shows a forecast growth of 5·7 per cent., but an achieved growth of 2·7 per cent., a shortfall of no less than 3 percentage points. The Chancellor of the Exchequer said that he had achieved his forecasts almost by accident. I think he said that we almost had an accident. Any study of that table indicates that this was a classic case of compensating errors.
My hon. Friends the Members for Horsham (Mr. Hordern) and Hendon, North (Sir Ian Orr-Ewing) intervened to challenge the figures which the Government are quoting on the subject of investment, and they were quite right to do so. Table 13 of the Preliminary Estimates shows that between 1968 and 1969 manufacturing investment increased by £161 million, or about 10·2 per cent. But that is at current prices, and it is the whole of manufacturing investment. If, on the other hand, one looks at the figures at constant prices, one finds that the increase was only 5·9 per cent.
Looking specifically at investment in plant and machinery, which the Chancellor has done almost nothing to help, again, at constant prices, there is a decline from £2,518 million in 1968, to £2,461 million in 1969. This is not at all a firm basis for the hymn of self-congratulation which the Chancellor of the Exchequer, the President of the Board of Trade, and the Financial Secretary have delivered to the House.
I must go on to make it clear that the rate of investment in this country has been inadequate for a long time, leading to a loss of modernisation and a failure

to innovate and raise the productivity of industry to the extent that we would all have wished to see. This has been due partly to the lack of credit, and the ½ per cent. cut in the Bank Rate will be of marginal help to some industry. It has been due partly to the difficulty of cash flow, and no doubt, for what it is worth, the increase in the initial allowances for industrial buildings will help a little. The Chancellor, on television the other night, talked about factories. It is perhaps unfair to expect him to make it clear that he was talking only about bricks and mortar, and not about anything that goes into them.
Overwhelmingly, the factor which has held back investment in recent years has been the lack of confidence of businessmen in the economic environment in which they have to operate. What makes a firm invest is a reasonable prospect of a decent return on the money invested, and this means, above all, a stable economic environment. While I will not be so foolish as to stand here and claim that in the Tory years we always succeeded in achieving this, neither have the present Government, despite the massive subsidies from the taxpayer, now amounting in the new estimates to £600 million for 1970–71.
The real truth—and it is interesting to see the hon. Member for Fife, West (Mr. William Hamilton) in his place—is that too many right hon. and hon. Gentlemen opposite continually give the impression that they regard the earning of profits and the receiving of dividends as disreputable activities. It is all very well for the hon. Gentleman to shake his head. He is on record, time and again, as condemning the profit-earning activities of private industry. We understand that the basic philosophy of the Labour Party is ultimately to eliminate the profit motive, but most sensible people regard this as a foolish Socialistic daydream. In the meantime, they must recognise that they are running a mixed economy in which the private sector is the wealth-creating and export-earning sector, and that they must create the climate in which the successful prosper, and prosper with honour.
To my mind, the most important single measure necessary to promote faster investment and to get a higher quality of investment is to reform the system of corporation tax, to relieve the total burden of tax on corporate profits and to


remove the bias against distributions. Government policy, with a severe tax on distributed profits, and expensive subsidies for capital investment, simply has not worked.
The reform which we currently favour, as my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) made clear in his speech to the Institute of Directors last October, is to go over to the French "avoir fiscal" system, under which a company would pay corporation tax on all its profits, would distribute dividends net of a withholding tax, but would not account to the Revenue for the withholding tax. It would be allowed as a credit against the corporation tax that it paid. We regard this as preferable to the split rate system, such as one finds in Germany, primarily because it is very much more favourable to overseas investment and reduces the complications of calculating double tax reliefs.
In our discussions many industrialists have convinced us that this is perhaps the most important single reform needed to revitalise corporative investment, but it must be combined with a more active and interventionist stock market. For long I have believed that the institutional investors should play a much more positive rôle as shareholders; often they come in only at the last moment of disaster. Mergers and takeovers may be some protection against inefficiency, but boards of directors need much more prodding and probing. There should be more dissatisfaction with low returns, more refusals to re-elect directors who do not produce good results, and more divesting of unprofitable businesses. I note with interest that the news that big institutional investors are taking an active interest in the management of one of our major engineering companies.
A reform of corporation tax, a radical reshaping of investment incentives, and a livening-up of the investment market could do more to revitalise investment than any other single act of economic management.

Mr. Sheldon: Is the hon. Gentleman saying that his party will encourage institutions to involve themselves in the management of companies in which they have an interest?

Mr. Jenkin: I am saying that they should be active shareholders. That is what the market requires. An increasing number of institutional investment managers are coming to recognise that that is their rôle. Most of this is anathema to hon. Gentlemen opposite. They do not accept any of this. As the right hon. Gentleman made clear, they put their faith in prodding and probing by the gentlemen in Whitehall.
We have heard talk of the Industrial Reorganisation Corporation. If the I.R.C. is to intervene to promote these mergers—and the President of the Board of Trade mentioned some of them—it seems to me that there must be an obligation on someone, somewhere, in the public sector to find out whether the advantages claimed for these mergers are being achieved. A great deal of evidence is coming out, particularly from America, that a large part of the so-called advantages of increasing the size of corporations is not emerging at all, and a very much more questioning attitude needs to be adopted to a lot of this intervention by Government. In a debate the other day my hon. Friend the Member for Basingstoke (Mr. David Mitchell) christened the C.I.M. the Commission for Interference and Meddling, and I thought that that was a very good title. Here we have the clearest possible contrast between the policies of my party and those of right hon. and hon. Gentlemen opposite, and quite soon the public will have an opportunity to chose between the two.
Before I deal with S.E.T., may I ask the Minister of State to clear up a minor doubt which has arisen in my mind? Table 17 of the Red Book sets out the amount of tax and effective rate for specimen incomes of persons without children as a result of the changes introduced by the Chancellor on Tuesday.
The simplest figure to take is the one at the bottom, £10,000 a year, but it is equally applicable higher up the columns. The difference between 1969–70 and 1970–71 appears to be only £7 17s. 6d. As I understand it, the differential between the married and unmarried personal allowance was to go right up into the surtax level and people paying tax on the highest rate would get the full extra £10. The Chancellor of the Exchequer actually mentioned this £10 with


a proportionate share of the benefit in the intermediate levels between the starting of surtax and up to the top. If that is right, Table 17 of the Red Book is wrong. Perhaps the Minister of State will clear up this point in his reply.
May I now turn to an entirely different subject and talk about S.E.T. The Government claim to have welcomed the Reddaway Report, but, from the Chancellor of the Exchequer's remarks on Tuesday, I find it difficult to believe that he has read a word of it. He said:
…one of the main objectives of the tax, to make more labour available for manufacturing industry, has been realised.
A little later he said:
…a substantial increase in numbers employed in manufacturing industry combined with a continued fall in the number employed in the main industries which bear the tax."—[OFFICIAL REPORT, 14th April, 1970; Vol. 799. c. 1243.]
What did Reddaway say about this? I invite the Chancellor of the Exchequer to look at what he said at page 17 of his report. It is in the second chapter, and one might have thought that the right hon. Gentleman would have got as far as that. Professor Reddaway refers to paragraph 4 of the White Paper on the Selective Employment Tax, Cmnd. 2986, and he says:
this shows obvious disapproval of the fact that 'over 80 per cent. of the labour becoming available went into services of all kinds, including distribution and construction', and it opens with the statement that S.E.T. 'will have a beneficial longer term effect by encouraging economy in the use of labour in services', with the apparent implication (drawn by nearly all our complainants) that the Government saw no corresponding need to encourage economy in the use of labour in manufacture.
On this, I would confine my remarks to the following brief points:
(a) It is my impression that the Government has ceased to use the kind of argument expressed in paragraph 4, or has at least shifted the emphasis in its case so radically as to render unnecessary a full examination of this unfortunate paragraph.
Professor Reddaway shares with many academics the naïve belief that self-evident truths disclosed by their own crystalline logic will penetrate the minds of Socialist Ministers. They do not, and there is no clearer evidence than the Chancellor of the Exchequer's unfortunate boast to which I drew attention of the House a moment ago.
We condemned the philosophy of paragraph 4 when S.E.T. was introduced. We have condemned it at every stage of every Finance Bill since then. We have repeatedly voted against the increases in S.E.T. which have magnified the consequences of what I called in an earlier debate this "fiscal brontosaurus". Professor Reddaway condemned it in language of unsual strength—what one commentator called brutal frankness—and assumed that Ministers had turned to paths of righteousness.
But no—the Chancellor, who in his own eyes, stands as a symbol of pure economic rectitude and fiscal enlightenment, proudly boasts that this prehistoric monster still reigns supreme in Great George Street, It is clear that Professor Reddaway must swiftly write an interim report exposing, once and for all, this foolish Socialist fallacy.
There are four points which can be made about the substance of Reddaway. The first one, which stands out a mile to anyone reading through the report, is how very tentative most of his conclusions are. Over and over again he goes out of his way to stress the inadequacies of the methodology which has has been forced to adopt, the limitations of the statistics he had to use, the impossibility of disentangling the different effects of different influences and, in particular, the effect of R.P.M. and S.E.T.
Many commentators have drawn false conclusions, apparently because the report uses a shorthand phrase "the S.E.T. effect". On examination, it is clear that this is intended to cover all changes that took place in the trends between the introduction of S.E.T. and the dates down to which the report was working. This is misleading and I hope that opportunity will be taken to make this clear. This is an academic report of great scholarship and of some interest, but, except in one or two respects, it is manifestly not intended as a blueprint for action and it cerntainly does not offer the unqualified support for S.E.T. which the Chancellor assumed on Tuesday.
My second point is that it is confined only to distribution, leaving untouched many of the more controversial fields such as commercial and scientific services, tourism, professional services, nursing


homes and many other sectors which we have debated over and over again.
Thirdly, the main basis of the study is the effect of S.E.T. on productivity, but simple measurements of manpower input in the services are not a good guide to the productivity and value of these service industries. There is no way of measuring the quality of service—the length of waiting time in a queue at the supermarket, the existence of credit and delivery facilities, the standard of service in restaurants and hotels. These cannot be measured; they are imponderable. Yet no study would be complete without taking account of them.
Fourthly, in so far as a conclusion can be drawn, it is this. By imposing a tax on some parts of a business's costs one can help to promote efficiency. If that is right, why confine it only to the service industry? If the argument is sound, and I believe it is, there is a case for shifting the emphasis of taxation of businesses from profits to costs across the board. That is exactly what a value-added tax is aimed to do, with the added advantage that a value-added tax, unlike S.E.T., unlike a tax on profits, is remittable on exports.
So far from endorsing the Government's case for S.E.T., Reddaway expressly and robustly condemns one of the Government's principal arguments in its favour and tentatively propounds a case which stands up much better by V.A.T. than for S.E.T.
Before I leave S.E.T., may I refer to wholesalers. Few statements in the Budget statement will have given more disappointment than the refusal of the Chancellor of the Exchequer to do anything for the wholesaling industry. Four years ago I became convinced that S.E.T. operated very unfairly on wholesalers because of the tiny gross margins on which they had to operate. Since then, the Government have compounded the damage by exempting manufacturing wholesalers and leaving independent wholesalers subject to the tax—a serious breach of equity.
The Federation of Wholesale Organisations has repeatedly made representations to the Treasury, twice with my support, and always the answer was,

"Wait for Reddaway". Reddaway has spoken, and spoken clearly in page 157:
Probably the most widespread and serious anomaly connected with S.E.T. is the one which arises when manufacturers and wholesalers are in competition.
Page 173:
…many wholesalers clearly have a very profound feeling about the injustice of the present position…
Reddaway, in his polite and academic way, makes it perfectly clear. He regards this as of the highest priority. He regards it as
the most widespread and serious anomaly".
Yet nothing has been done, causing bitter disappointment. Wholesalers do not ask for special treatment. All they ask is that the unfair discrimination should be eliminated. It is not right to measure that unfairness, as the Chancellor of the Exchequer did, by the cost of total exemption, which he put at £50 million. At the very least, the Government must put the independent wholesaler on the same basis as his principal competitor, the manufacturer who does his own wholesaling from a separate establishment.
The President of the Board of Trade is the sponsoring Minister for the wholesaling industry; he has suffered a costly and damaging defeat which stands to his discredit.
Finally, on more general matters, last year I made a plea for more open, pre-Budget consultations on fiscal innovations. I questioned the cult of Budget secrecy and such matters. Nothing I have read or heard since then has convinced me that I was wrong, but I need not repeat it. The Select Committee is now examining this, and I look forward with interest to its report.
Since then, we have had the Report of the Select Committee on Procedure on Public Expenditure and the White Paper which was published in December. The Budget's impact can be judged only in relation to its effect on the economy in the whole public sector. There was great value in the approach of the White Paper, because it did just this. Especially was this so of Table 1.2 of the White Paper, which I am sure Ministers will remember. I have looked at it carefully, but there is nothing in the Red Book and nothing in the Preliminary Estimates which reproduces Table 1.2. I suppose that it would


be possible to construct it, but it would be extremely difficult, mainly because of the price adjustments which have to be made. It would be helpful for that table to be reproduced each Budget time so that we could see how far the Budget has had an impact on the expenditure decisions which the House will have taken three or four months earlier.
Many of those who took part in the debate in January recognised the need to enhance the importance of the public expenditure debate to some extent, and reduce the relative importance of the Budget debate. One could not be more struck by the contrast between the first day of this debate and the first day of the debate in January. On Tuesday, the House was crowded, the galleries were packed; every Press man had his pencil poised waiting for the Chancellor of the Exchequer's lightest thought. Last January we had a very respectable House. The House remained well attended for the full two days. perhaps rather more than it sometimes does in the middle of the afternoon during Budget day. But the Press Gallery was as empty as if it had been a public meeting called for the Minister of Technology, and the subsequent reports in the newspapers suffered from this.
One way of overcoming this is to relate Budget decisions to public expenditure strategy, which will have been decided in the earlier debate. I hope, therefore, that the tables will be reproduced. [Interruption.] I am talking about Tuesday. The hon. Member for Penistone (Mr. John Mendelson) is here to listen to me, though the Press are not. It is important that people should pay as much attention to an expenditure debate as they did on Tuesday. I am sure he agrees with that.
What do the Government intend to do about the recommendations of the Select Committee on Expenditure? The Government rightly have taken time to make up their mind and come to a decision. My right hon. Friend the Member for Enfield, West agreed that it was right to try this experiment, but we must now have an answer from the Government.
For me, this debate has been a novel experience as the first Socialist Budget debate where the Government have actually reduced taxation, and I am finding it a difficult process of adjustment.

My puzzlement is nothing to that of some hon. Members opposite. They were promised two years' hard slog, with growth stifled, taxes hoisted, prices soaring, employment falling. What have they to show at the end of it? Yes, there has been a substantial turnround on the balance of payments, which perhaps owes far more to devaluation than to anything else; but where is the pay-off? Why is there to be no surplus in the housewives' balance of payments?
On the contrary, taxes still stand as £3,064 million higher than they were when we left office. Prices are now rising at twice the rate they were in the last quarter of 1969. The first quarter's index, published today, shows an increase of 2·6 points up and The Times commented this morning:
At this rate the £200 million of tax concessions contained in the Budget, and viewed as an addition to consumer buying powers, will be quickly soaked up by higher prices.
The Chancellor of the Exchequer stands condemned because he did not give greater importance to this accelerating inflation.
But I suppose that he was entitled to the boast with which he ended his Budget speech. Perhaps for a Socialist Chancellor the right hon. Gentleman can take pride in his epitaph on the last April Budget that it will ever be his privilege to introduce, when he said:
No one should be effectively worse off."—[OFFICIAL REPORT, 14th April, 1970; Vol. 799, c. 1252.]
From the standpoint of taxation reliefs the right hon. Gentleman's boast is unique in the annals of Socialist Budgets. I know no other Socialist Chancellor who could have said as much.
If the overall standard of living is taken, the Chancellor's reliefs in the words of an old, and, indeed, my favourite hymn, will
…fly forgotten as a dream
Dies at the opening day.
By the time the Finance Bill emerges from Committee the tax reliefs will have been borne away into oblivion in a flood of rising prices. The Chancellor will go down in history books as the man who presided over the swiftest, most frightening inflation since the late Hugh Gaitskell introduced his first and only Budget. Like Hugh Gaitskell he, too, probably also in October, will be replaced when the Prime Minister and his discredited


Government are swept ignominiously from office.

4.57 p.m.

Mr. William Hamilton: That peroration by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) must have taken a great deal of preparation. It was hardly worth it. We prefer to hear the right hon. Member for Enfield, West (Mr. Iain Macleod), who at least has a bit of originality.
I shall refer to one or two of the points made by the hon. Gentleman about higher prices. This matter is troubling everybody in the House and in the, country at large. However, we have heard no answer to the problem from the benches opposite. On the contrary right hon. and hon. Gentlemen have continuously advocated policies which would have the opposite effect. Their policies would increase prices even more substantially and faster than they are rising at the moment. It would be ill-advised of the Conservative Party to pretend that it can prevent this kind of inflation which we are now seeing. We are all disturbed by the rate of inflation, and it would be unfortunate if the impression were created that any one party had the solution to the problem when the other party had not. The truth is that nobody anywhere in the world has found the answer.
When the hon. Gentleman referred to replacement of S.E.T. by a value-added tax, he made no calculation of the probable effect on the cost of living. The evidence produced by Professor Reddaway and others is that the effect of S.E.T. on the cost of living is not very great, certainly much less than would result from the imposition of the value added tax proposed by the Conservative Party. Hon. Members opposite have never said at what rate a value-added tax would be imposed or what the exceptions would be. I believe that the right hon. Member for Enfield, West spelt this out at his party conference, but subsequently he has been very cagey. He knows that the value-added tax across-the-board would substantially increase the cost of living.
We should be clear about two points. The first is as to how, when and over what period S.E.T. would be abolished. The second would involve a similar kind of timetable for the imposition of the value-added tax. The housewife will be

most interested to know the timetable because it will greatly affect her purse and what is in her shopping basket.

Mr. F. A. Burden: The abolition of the selective employment tax is one small point in replacement of present taxes by V.A.T. Purchase tax would go. Taking purchase tax at 13i per cent., if V.A.T. at the same figure were added the price would not increase for the Treasury and the public would not have to pay the profit on the tax which in many cases they pay at the moment.

Mr. Hamilton: I hope that this policy will be spelt out from the Opposition Front Bench. The net inflow from S.E.T. at the moment is £588 million, which is the estimate for next year. If the right hon. Member for Enfield, West, as he said on television last night, is to abolish S.E.T., and if there is to be a big reduction in income tax and surtax, does he envisage a figure of £500 million in respect of that reduction and, if so, over what period? If the £600 million from the abolition of S.E.T. is added to the figure of £500 million in income tax and surtax, a total of £1,100 million, the Conservative Party must say where it intends to get that money in future, or else it should say in what directions it will cut public expenditure by that amount.
Hon. Members opposite also say that they will increase expenditure on defence. Therefore, the only inference to be drawn is that they will savagely cut expenditure on the social services. To be fair to them, they have indicated that they would do just that. They have said that they will radically reduce housing subsidies, if not eliminate them entirely. The consequence of that must be a substantial rise in the cost of living for people who live in council houses. Despite what we hear from hon. Gentlemen about Jaguars standing outside council houses, it is the people on low incomes who will be hit. Conservative policy on these taxes must be spelt out in more detail.
Coming to the Budget proposals themselves, I was interested to see the reaction of the evening newspapers. The Evening Standard headline was
Roy dishes out the sunshine".
I am not sure how one dishes out sunshine, but that was the spot judgment of that newspaper.
But on the very same evening the headline in the Evening News was:
Little joy from Roy".
One pays one's money and takes one's choice.
I prefer the rather more objective judgment of The Times business news editorial the following morning, which described the Budget as
A useful step in the right direction
which
should receive a cautious welcome from the world of business.
I am not sure that that comment would commend itself to those of us on this side of the House, certainly not on those grounds. But the decision by the Chancellor to reduce restrictions on credit, give a positive encouragement to increase industrial investment and establish development areas will be welcomed by some of us, though not perhaps all.
It is a fallacy—and it is dangerous perhaps to say this in election year—to presume that we are a grossly over-taxed nation compared with other developed industrial nations. I read an interesting article in the National Westminster Bank Review a few months ago by Professor Hill. He pointed out that one of the big problems in our society was not over-taxation but over-consumption in the private sector.
The hon. Member for Wanstead and Woodford presumed to claim that the reason for under-investment was lack of confidence in the present Government. But if he looks at the record of his own Government on this matter it is nothing to boast about. Professor Hill produced facts and figures to show that over the generations public investment in this country has been at such a low level that we have been left behind by many other countries. We are now paying the price. We are modernising industry, but, meanwhile, we are having to increase taxation to do that, among other things.

Mr. Patrick Jenkin: Many of us read the article by Professor Hill mentioned by the hon. Gentleman. Does he not agree that what Professor Hill made clear was that a period of rapidly rising taxation, such as occurred in the first four or five years of this Government, throws a great strain upon everybody and causes difficulties?

Mr. Hamilton: I agree with the hon. Gentleman. That article was an objective assessment of the situation. Our debates would benefit a great deal if we were a little more objective and a little less partisan than we are. But this is asking far too much.

Hon. Members: Hark who's talking.

Mr. Hamilton: It can now be seen how fair I am. [Laughter.] Hon. Gentlemen laugh as if I do not believe what I am saying. What Professor Hill was saying in that article was that we had need for more investment and that in the modernisation of our industrial structure this Government were determined to maintain and improve the social services so far as they could. We on this side strongly believe this. This is why we have seen a massive increase in taxation, which I would be the last to deny and the first to support. If right hon. Gentlemen opposite say they are going to reduce taxation, it can only be at the expense of the social services.

Mr. Peter Hordern: Where does the hon. Member see evidence of this modernisation? Investment in new plant and machinery in 1969 was less than it was in 1967 or 1968.

Mr. Hamilton: One can see modernisation wherever one goes in the country. One sees it in the nationalised industries. One sees it in the coal industry, in which hundreds of millions of public money has been invested. If in private enterprise there had been a growth in productivity comparable to what has taken place in the coal industry over the last 10 years. we would not be in the kind of difficulty that we are today.
One sees the same kind of increase in productivity in agriculture. Hon. Gentlemen opposite complain that farmers' incomes have not kept up with the massive increases in productivity as a result of modernisation and of pouring in of capital, often public capital, into the private agricultural industry. All this modernisation is taking place. I would invite the hon. Member for Horsham (Mr. Hordern) to go to Scotland to see what industrial modernisation means there. He should go to the new towns and see the kind of public investment that exists in housing, in the infrastructure, in the shipbuilding industry, and so on. The hon. Gentleman


might argue that modernisation is not going on fast enough, but it would be idle to deny that it is going on.
The Chancellor was right to err on the side of caution in regard to the reduction in restrictions on credit, and in his taxation proposals. If he had produced, as right hon. and hon. Gentlemen opposite did in all their pre-election Budgets, a reckless abandonment of anything except purely electoral considerations he would have been vehemently criticised by that side, and in political terms it would have been counter-productive. The British electorate are far too sophisticated to be taken in by that kind of exercise. Had my right hon. Friend been tempted, his room for manoeuvre to a great extent was limited by the extraordinary growth in personal incomes over the last 12 months. I can say that, but it ill behoves the right hon. Member for Enfield, West and other hon. Gentlemen opposite to criticise the Government on that count, because they have always opposed the prices and incomes policy which this Government have tried to impose on the country.

Mr. Iain Macleod: Which one?

Mr. Hamilton: The right hon. Gentleman asks: which one? I ask him the same question. Is it the prices and incomes policy of the right hon. Member for Barnet (Mr. Maudling), a former Chancellor of the Exchequer, or the lack of a prices and incomes policy by the hon. Member for Oswestry (Mr. Biffen) or the right hon. Member for Wolverhampton, South-West (Mr. Powell)? I cannot pretend that there is unanimity of opinion on this matter on either side. At least this Government can be given the credit for seeking to get an acceptable prices and incomes policy which is fair. But I see no evidence of any proposal coming from the Opposition which would have any greater success. The Opposition can talk about and criticise the growth of incomes, but what they will do about it is quite another matter. We have not heard any positive proposals.
Whichever party is in power after the next election, there will have to be Government intervention in this sphere in one form or another. I welcome the attitude of Victor Feather in this matter, but whether he will carry with him the T.U.C. General Council and the individual union leaders is another matter.

The unions, by their very nature, look after their members.

Mrs. Renée Short: It is their job.

Mr. Hamilton: Of course it is. But it is the job of the Government to interpret the national interest. If the national interest conflicts with any sectional interest, the decision of the democratically elected Government must prevail. We must find machinery to reconcile these two points of view. I hope that no one will pretend that this is an easy exercise or that the problem will be solved within the lifetime of a single Parliament. It will be a long time before we get to the situation where the Government's interpretation of the national interest will be easily reconcilable with the interests of individual trade union leaders. I hope that the Opposition will not go the country and try to fasten on to these discontents, whether it be industrial unrest, law and order, or prices and incomes, and try to pretend that they have the solution to all these problems.
When trade unions are bargaining they are bound, in the nature of things, not to ignore but to take less account of social considerations and principles of equity than the Government. The Government have a duty to take account of social considerations and principles of equity and to make reliable judgments on where the national interest lies. It follows that, whichever party is in power, there must be Government intervention at some point.
I have listened to some of the speeches. It is the easiest of exercises to make cheap political capital out of the small change, and sometimes the big change, of particular budgetary proposals. There are as many budding Chancellors of the Exchequer, on this side as well as on the Opposition benches, as there are Foreign Secretaries and Ministers of Defence. We can all do the job better than the fellow doing it at the moment. [HON. MEMBERS: "Hear, hear."] We are all far better than these fellows on the Front Bench.
The speeches from the Opposition Front Bench on Tuesday by the Leader of the Opposition and yesterday by the right hon. Member for Enfield, West bore all the hallmarks of midnight oil burnt a week or two ago. They were none the better for that. I think that 95 per cent.


of the speech yesterday by the right hon. Member for Enfield, West could have been written and expounded before the Chancellor opened his mouth.

Mr. John Mendelson: It was last year.

Mr. Hamilton: It was rehashed and brought up to date. The right hon. Gentleman's wit is well known and appreciated by hon. Members on this side, but I thought that his speech yesterday was rather more muted in its humour than in his traditional and predictable spitting at the Prime Minister.

Mr. Michael Foot: To be fair to the right hon. Member for Enfield, West (Mr. Iain Macleod), he omitted altogether on this occasion his demand that we should keep right on to the end of the rocky road to deflation.

Mr. Hamilton: We like the speech better each time we hear it. I hope it lasts.
This much can be said for the right hon. Gentleman. He displays a good deal more originality and parades before us a much less dull and dreary stodge than the Leader of the Opposition. How the right hon. Member for Enfield, West must long for the return of a leader from the "Magic Circle". At least if that had happened we on this side would have got something that we expect. Now we have a kind of political eunuch—someone not out of the top drawer. I have heard many hon. Gentlemen opposite say how much they regret the leadership that was imposed upon them by democratic machinery, but they have to live with it. That is their problem, not ours.
The right hon. Member for Enfield, West, quite rightly from his point of view, made great play on the increases in taxation under this Government since 1964. I have already mentioned that and the reasons for it. I do not think that we need apologise too much for it. I should be prepared to and will defend it on possible occasions. But there is no doubt that millions of ordinary workers feel that they are too heavily taxed. I have often made the point on public platforms that it is a new phenomenon.
I come from a mining family in Durham. I do not remember my father complaining about income tax problems. We

were lucky when he had two pound notes in the pay packet to keep six of us. There were no income tax problems then. Therefore, the fact that we have income tax problems today is some proof, though not decisive, that we are increasing our standard of living. For right hon. and hon. Gentlemen opposite to pretend otherwise is sheer humbug and nonsense, and they know it.
When I look around my constituency and compare it with the situation 20 years ago—not in the 1930s, but in the 1940s and 1950s—I see visible signs of increased affluence. Of course there are large pockets of poverty; but I cringe when I hear right hon. and hon. Gentlemen suddenly finding a social conscience. They find it as soon as they find their backsides on the benches opposite. They do not find it when they are in Government. There will be a very different story told if they come on this side of the House. We shall not then hear the same kind of speeches about poverty-stricken large families and the over-80 non-pensioners.
I mentioned the right hon. Gentleman's promise on television last night of sweeping reductions in income tax and surtax and the abolition of S.E.T. I hope that before the end of this debate we shall have some specific figures and timetables on that, and that the Opposition will spell out in detail their proposals on the value-added tax and their proposals to increase expenditure.
I agree with the hon. Member for Wan-stead and Woodford about the implementation of the proposals of the Select Committee on Procedure, in so far as we hope to get a Select Committee on Expenditure. It is important—probably more so—to have that Committee and the kind of debate which we have had on the White Paper as it is to have debates on the Budget. I hope to see debates on that aspect of our problems made as high a priority as the debates on the Budget. Certainly, the attendance at that debate and the interest in it was far greater than it has been today and certainly than it was yesterday.
On the specific taxation proposals in the Budget, the Chancellor was right to say that he was inhibited, first of all, by the wage settlements of the last few months and, to a lesser extent, by the great burdens imposed in recent years on


the Inland Revenue. The Estimates Committee reported on this point; we accepted the evidence of the staff association in this matter. Certainly they could not bear very many more burdens than they have had in the last two or three years, but even within those limits the distribution of the £200 million which the Chancellor evidently had at his disposal might have been more imaginative and more socially just.
For instance, this is not the time for any relief for surtax payers. I know that my right hon. Friend made his case not on social grounds but on administrative grounds, that it was too costly to collect, but this is not a very good argument just now for that kind of relief——

Mr. Arthur Lewis: The Chancellor did not use that argument about Health Service charges—that they were too costly to collect. He kept those on when he could have taken them off.

Mr. Hamilton: I do not want to be too unkind to my right hon. Friend. There is a time and place for that. When one is pressing the enemy there is a case for presenting a united front so far as one can.
I was about to come to the point, putting it in less brutal language than my hon. Friend. If there were £5 million, or whatever, available, it might have gone into other pockets than those of surtax payers. The right hon. Gentleman said yesterday that we have all been impressed—he, I suppose, as much as anyone—by the evidence of the continued existence of these large pockets of poverty still in our midst—not only financial poverty but social deprivation in education, housing and the rest. If there is money to spare, however small the sum, it would be much better diverted into those channels than into the channels which my right hon. Friend preferred.
The same applies to the income tax relief. Instead of increasing the allowances, it would have been preferable to increase the minimum earned income allowance to a flat rate, as suggested by the T.U.C., which would have been more satisfactory than the present two-ninths. This would have done more to help the lower wage earner than the Chancellor's proposals. I do not know whether this

would have imposed a greater burden on Inland Revenue staff or whether this was a consideration which my right hon. Friend had in mind, but, in the circumstances, this was a realistic and honest Budget, based on the best judgment which the Chancellor could make, irrespective of political considerations. That is an unusual event in the last 20 or 30 years. For that, the country should be very grateful, and I think it will be.

5.25 p.m.

Mr. John Boyd-Carpenter: An appeal for more objectivity and less partisanship from the hon. Member for Fife, West (Mr. William Hamilton) has rather a compelling charm, by reason perhaps of its naivety. It is fair to say that where he subsequently departed from his own advice and showed partisanship, he showed it with some impartiality against both his own right hon. Friends and my right hon. Friends.
But I must take the hon. Member up on one of his own departures from it. He sought to justify the massive increases in taxation which this Government have imposed upon the people broadly on the ground that this had enabled the social services to be improved. He went on to suggest that the concern of my right hon. Friends for improvements in social provision would evaporate when, as he appeared to accept would shortly be the case, they were translated to the benches opposite.
The hon. Gentleman can satisfy himself that he is wrong on both those points by simply referring to what happened in the years of Conservative Government. In those years there was combined a steady and progressive reduction in the rates of taxation—the standard rate of income tax was reduced overall by 1s. 9d. in the £, and the top rate of purchase tax from 100 per cent. to 25 per cent.—with a progressive and steady building-up of the social services. If he does not regard it as wounding of me to say so, he fell into the error in which the Prime Minister involved himself at Question Time, when he sought, with manifest ignorance of the facts, to attack the social record of the late Government.
How was this double achievement of lowered rates of taxation and vastly improved social services effected? It was effected because the measures taken by


the Government greatly increased the national product, with the result that an ever-diminishing proportion of an ever-rising national product provided an ever-increasing revenue. For example, it enabled us to treble the expenditure on education over the period of that Government and to make the very substantial improvements in the real value of social benefits which also occurred.
The whole reason for this increase in taxation under this Government, combined with a failure to deal with social problems, which I concede at once they would like to deal with, has been their failure to get an increase in the national product, on which everything depends. It is quite wrong for the hon. Gentleman to say that the fact my right hon. Friends are determined to reduce the burden of taxation implies that they will do other than they did previously when in office—at the same time make steady, intelligent and progressive improvements in the structure of our social benefits. They will be able to do this for the same reason as they were able to do it before—because they could get this increase in the national product, in respect of which, as The Economist pointed out last week, the Government's own record shows such a lamentable failure.
I think most hon. Members agree that any Budget has two main objects. One is to secure the strengthening of the economy, to correct any adverse tendency and to strengthen our capacity to earn our living in the world. The second is to secure that those suffering real hardship get alleviation of it. Taking the main feature of the Budget, the increase in personal allowances with the concurrent elimination of the reduced rates, the Chancellor in trying to achieve both these objects has fallen between two stools and achieved neither. It is a naïve illusion to believe that one can relieve real poverty through changes in direct taxation. The really poor, the man with low earnings and with a large family, the disabled and partly disabled, and the old are below the current levels of direct taxation. One can help them only by carefully chosen increases in social benefits.
I support with great enthusiasm the suggestion of my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) that it would have been far

better to tackle the problem of large families through the family allowance system. There is a method of doing this and concentrating the money where it is really needed which is slightly better than the claw-back proposal which, with some reluctance, my right hon. Friend suggested. It is quite simply to adopt the principle of increases in family allowances being granted to families which do not claim the income tax child allowance, and to give the same kind of option as is given under the mortgage option scheme. Those who cannot be helped through the tax system may be helped by an increase in their social benefits.
Quite a limited sum of money concentrated there would have done far more to eliminate real poverty than the expenditure of nearly £200 million in the Budget. Where will much of that £200 million go? lit will go to young people still living at home and to part timers, and a great deal of the relief will go to perfectly admirable people but people who no one in this House would say were the real sufferers from poverty today. Therefore, as a social measure this must be a failure.
What about it as an economic measure? Heaven knows, the economy needs some measures to improve it. We have behind us five years of Socialist rule one of the three features of which has been a growth rate of no more than an average 2·2 per cent. This is about half what it was in the preceding five years of Conservative Administration. We have had, secondly, the extraordinary feature, almost without precedent, of a combination of galloping inflation and a high level of unemployment. No theoretical economist would have said a few years ago that this was possible. I cannot but recall the splendid witticism of that great wit the late Aneurin Bevan. He said some years ago—I think it was outside the House—that this was an island made up mainly of coal and almost completely surrounded by fish and that it would take an administrative genius to create a shortage of both at the same time. This Administration has done a similar thing. It was an extraordinary achievement technically of this Government to have maintained unemployment for two and a half years at a level, with the exception of one month, above half a million at a


time when prices were rising steadily and at almost twice the rate that they did under the previous Government.
Then there is, thirdly, the unhappy aspect which the hon. Member for Fife, West tried to brush aside, the extraordinary increase in taxation. Quoting from the Economist in an admirable leading article last Friday—I rest my figures on this and the Minister of State can challenge them if he likes—it appears that taxation, including, of course, National Insurance contributions and local rates, has risen from 33·1 per cent. of the gross national product in 1964 to 44·3 per cent. in 1969. It will be only marginally affected by the changes in the Budget, particularly when we remember the extra £40 million to be clawed in by the increase in National Health Service contributions with which the House is dealing this week.
This burden of taxation has a great deal to do with the lethargy, weakness and lack of enterprise and incentive which are major contributing factors to these three unhappy features of Labour economic administration to which I have referred. The hon. Member for Fife, West said perfectly truthfully that if we take the totals of taxation and compare them with those of other developed countries the percentages do not very significantly differ. What does differ startlingly is the distribution of that taxation and the way in which the burden is imposed.
I asked a Question of the Financial Secretary to the Treasury this year, following a similar one which I asked a year ago, and I draw the attention of the House to some parts of the answer. I asked
what percentage of the next £1,000 of his earnings above £5,000, £8,500, £10,000 and £15,000 a year is now retained by a married man with two children under 11 years of age".—[OFFICIAL REPORT, 12th February, 1970; Vol. 795, c. 398–99.]
in this country and among our principal competitors. I need not inflict on the House all the figures in the answer for it is in HANSARD for 12th February. It lends point to my argument. On the level of £8,500 a year—and no member of the Cabinet can suggest that these are excessive earnings for any man—the Englishman keeps out the the next tranche of £1,000 39·9 per cent. The American has 64·5 per cent., the French-

man 69 per cent., the German 55–8 per cent. and the Japanese about the same as the Englishman. But when we get to the £15,000 a year level, which is three-fifths of what the Government permit, quite rightly I think, for chiefs of the nationalised steel industry, the figures are really startling. In the United Kingdom the amount is 15·7 per cent., in the United States it is 47·8 per cent., in France 61·3 per cent., in West Germany 49 per cent. and even in Japan 30 per cent.
Is there anything in the economic performance of this country to suggest that in this contrast with our most effective competitors it is we who are right and they who are wrong? Is not the overwhelming inference that high levels of taxation of this sort on the highest earnings have a damaging effect on the working of the economy and, therefore, upon every citizen?
There was a very striking admission of the truth of this point of view in the Budget Speech of the Chancellor of the Exchequer last year when he said:
I referred last year to the fact that, whatever the evidence or lack of it, high direct taxation is widely believed to be disincentive, and that this could have a stultifying effect upon the development of the economy.
He went on to say that even in the circumstances of last year, circumstances in which he had no reliefs to give, he had
carefully considered whether, even in a year as difficult as this, it could be justifiable for incentive reasons, and for the encouragement of savings, to mitigate slightly the rates of tax on high earned incomes.
Having said with apparent regret that he could not do it last year, he said:
I would emphasise, however, that I regard an increase in one of the earned income allowances as a high priority for a later Budget."—[OFFICIAL REPORT, 15th April, 1969; Vol. 781, c. 1031–32.]
Therefore, it is not only Conservatives who claim that taxation at these levels is damaging. The Chancellor admitted it; and I can only express my regret that this year, when he did find himself with balances to dispose of he did not see fit to take any action.

Mr. Stan Newens: Would the right hon. Gentleman make it clear whether he thinks that there is a greater priority to give taxation relief in the income band to which he has referred, the high income band, than in the low income band, to which my right hon.


Friend the Chancellor directed his attention in the Budget?

Mr. Boyd-Carpenter: I cannot do better than repeat to the hon. Gentleman the words of his right hon. Friend that these were entitled to "high priority", for the reasons which he gave, good reasons which are important to every citizen, because the proper working of the national economy is in the interests of all.

Mr. Russell Kerr: That is not the right hon. Gentleman's answer.

Mr. Boyd-Carpenter: I cannot accept the hon. Gentleman's judgment in these matters as to the adequacy or otherwise of my answer. I am prepared to leave that to the House.
I want to come to the other serious aspect of taxation, taxation by selective employment tax on the sources from which invisible earnings are drawn. I must here declare an interest. As the House, I think, knows already, I happen to be chairman of an insurance company which, I am glad to say, makes a substantial contribution to our balance of payments by its earnings overseas.
We had a most extraordinary exhibition by the President of the Board of Trade this afternoon. He gave the impression that the present Government had invented invisible earnings, and praised them in a way that was very curious for a Socialist Minister. But when my hon. Friend the Member for Cirencester and Tewkesbury (Mr. Ridley) asked him what he would do about the taxation limitations on those who earned invisible earnings he just said, "That's enough," with a brush of the hand. But that is not enough. If these activities—banking, insurance, tourism—are making a major and increasing contribution to the balance of payments, is it not extraordinary to indulge in discriminatory taxation against them? Is it not extraordinary to say, as the Chancellor did in his Budget speech, that the tax is having the effect of moving workers into manufacturing industries?
If it is the invisibles that are making possible the spectacular improvement in our balance of payments, and if there is a pool of half a million unemployed, which the Government have created, what is the sense of seeking to move workers from this efficient, remunerative sphere

into manufacturing industry. There is no shortage of labour for manufacturing industry. There is a substantial amount of unemployment. But even if this were not so, does not the experience of the United States show that the more advanced a society becomes the larger the proportion of people working in service industries, while an ever-smaller proportion work in highly-mechanised, automated or electronically-controlled productive industry?
S.E.T. is an attempt by the Government, and not the only one, to push back the movement of progress. They are trying to make us less of a progressive forward-moving society than we should be. If those who earn invisible earnings make such a contribution to the balance of payments, why discriminate against them in taxation?
There is the argument, which I think is naive, that the more we tax people in this way the more efficient they become. Very well. If this is to be done to the earners of invisibles, is there no greater efficiency required in manufacturing industry? Is there no hoarding of labour in, for example, the docks or the printing industry? If there is a need for the tax for reasons of greater efficiency, why should we in the invisibles alone enjoy its benefit? Why are the Government so selective in conferring what they regard as a favour? The nonsense of the tax is, above all its selectivity and that it is selective against those activities which contribute to the balance of payments without involving us in an increase in imports of raw materials.
Turning to another source of invisible earnings, the Chancellor told us on Tuesday that he proposed to continue the so-called voluntary restrictions on investment in the developed countries of the sterling area—Australia, New Zealand, South Africa and the Republic of Ireland. This might have been justifiable, though I doubt it, at a moment of extreme urgency in the balance of payments. It is jolly difficult to justify it now when the first half of the Chancellor's speech was full of the sunshine of success in respect of the balance of payments.
I wonder why it is necessary to discriminate against investment in precisely those parts of the sterling area where remunerative and effective investment is


most likely to be achieved? In particular, I wonder whether the Chancellor realises the chances we are losing every year in Australia, which is in a mood of exuberant expansion. The discovery of minerals and the general toning-up of her economy are making her the success of the 1970s. Japan and the United States are investing heavily there. It is Britain that is falling behind, not because our investors lack the enterprise or judgment to invest there but because the Chancellor prevents them.
There might be a case for a non-discriminating restriction on capital investment overseas, though I would like to see it very strongly made before I would accept it, but there can be none for one which leaves companies free to invest in all sorts of countries where the prospects are less good than in the four countries I have mentioned, and which denies Britain, once the investing centre of the world, proper facilities to invest in the areas where the greatest progress is to be expected. The Chancellor's argument—if one can dignify it by that name—was wholly inadequate. I do not think that he convinced even himself.
The Chancellor must be desperately worried about the wage explosion, and the idea may even have reached the President of the Board of Trade, although he did not mention it. If, as appears to be the fact, wages will rise at an annual rate of 10 per cent. and the Chancellor plans for an increase in the national product of only 3½ per cent., large-scale rises in prices are plainly and mathematically inevitable. What will they do to our competitiveness, to our cost of living? We see the signs of trouble already, as reported in today's issue of The Times Business Supplement. What are we to do about this? The Chancellor said words to the effect that the situation just cannot go on like this; but what will he do about it? Last year he had an answer, so he told us. The answer was the elaborate legislation which he foreshadowed, which was the support of the Budget policy, and on which the Prime Minister was heard to say he was prepared to stake the life of the Government. Now it is nothing.
The Financial Secretary said yesterday that he would watch the progress of wages. No doubt that was an accurate description of what the Government pro-

pose to do. It is not good enough for the Chancellor to say in the most solemn way that if the situation continues it will be very serious, as indeed it will, and give no indication whatever this year what the Government propose to do about it. That is the final weakness of the whole of his Budget structure.
This is a curious end to the Government's series of Budgets and economic measures. We remember how it all began. Then we were told that Labour was ready, poised to apply the new thinking, with remedies to end the sterility and chaos. Now we see that sad spectacle of stifled growth, rising prices, high unemployment, rising taxation and a Chancellor with no remedies to suggest for an evil which he knows may wreck our economy.
So the world ends, not with a bang but a whimper.

5.50 p.m.

Mr. Ted Fletcher: The right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) made an eloquent plea on behalf of surtax payers. That is in striking contrast to the point of view put by some of his right hon. and hon. Friends who are very concerned about the problem of child poverty. The right hon. Gentleman ducked the question from my hon. Friend the Member for Epping (Mr. Newens), who asked him where his priorities were, whether they were cuts for surtax payers or the elimination of child poverty.

Mr. Boyd-Carpenter: Is the hon. Gentleman aware that the Chancellor has done nothing for child poverty and has given a concession to surtax payers?

Mr. Fletcher: I am perfectly aware of that, but we have pleas from the right hon. Gentleman on behalf of surtax payers generally, because he says that the concessions are not enough. He reads out tables to show that the rich are greatly oppressed compared with those in countries on the Continent and in America. But what hon. Members opposite should be doing is to spell out the alternative financial policies they would adopt if they were returned to power. The right hon. Member for Enfield, West (Mr. Iain Macleod) said yesterday:
I do not normally respond to the invitations I sometimes get from some hon. Members opposite to produce alternative proposals.…"—[OFFICIAL REPORT, 15th April. 1970; Vol. 799, c. 1400.]


But the House is entitled to know what the proposals of right hon. Gentlemen opposite would be if they were returned to power.
We have had many speeches on the problem of higher prices. There is obviously concern that prices continue to increase, but what will prices be when there is a cut in housing subsidies, for example? Although the policies of right hon. and hon. Gentlemen opposite have not been spelt out in this debate, the evidence is available in pamphlet form. They have said that they intend to reduce subsidies on council houses, except for those who are old or infirm. This will have a big impact on the cost of living of those who live in them, and mean higher prices.

Mr. T. L. Iremonger: The policy already applied by many Conservative councils is to give substantial relief on the economic rent for families demonstrably in need.

Mrs. Renée Shod: That is because the Government supply them with the money. The hon. Gentleman's Government would not.

Mr. Fletcher: I think that what the hon. Gentleman has in mind is that rents are redistributed in the form or rebates to people on the lower salary levels. This is entirely different from Government assistance by direct contributions to local housing revenue accounts. It is the hon. Gentleman's party's policy substantially to reduce or abolish them, except for those in special need.
The question of what will happen to agricultural subsidies has not been mentioned in the debate. It is estimated that if they are drastically reduced or abolished there will be a 5 per cent. impact on the cost of living.
What about the value-added tax? We have not had any definite statement during the debate that it is the policy of the Conservative Party to introduce such a tax if it was returned to power. According to The Times, this would have an immediate effect by imposing a 2 per cent. increase on the cost of living.
Then we have to consider the wider programme, the military expenditure. The Leader of the Opposition has said that it is the intention of a future Con-

servative Government to deploy troops east of Suez. It is estimated that this would cost an additional £300 million.

Sir Ian Orr-Ewing: Nonsense.

Mr. Fletcher: Speculation perhaps. In some quarters it is £100 million and in others £300 million.
Whatever can be said about the figure there will be a substantial increase in the amount spent by such a Government on defence expenditure. All these things are bound to have an impact on the cost of living. It is unreal for us to consider the question of taxation in isolation.
It is true, and the Opposition have made the most of the figures, that taxation has gone up by £3,000 million during the period of Labour government. So, however, has expenditure on the public services. For example, we are now spending 60 per cent. more on our educational services than we were in 1964. We are now spending 40 per cent. more on our hospital services than in 1964.

Mr. Maurice Macmillan: Can the hon. Gentleman explain how it is that increased Government expenditure has caused this great rise in taxation, considering that we have a surplus on Budget account of £2,000 million which seems to suggest that the rise in taxation is greater than that required by Government spending?

Mr. Fletcher: I am sorry, but I did not hear that.

Mr. Macmillan: I was suggesting that there were other causes of higher taxation since the Government are raising, in taxes, £2,000 million more than they are spending. It is difficult to explain the higher taxes by the needs of expenditure on the public services.

Mr. Fletcher: Obviously, the Government are not creating a pool of taxes and keeping them in reserve. The Government have to produce revenue to expand the services. This is rather like the Lord Mayor, who was on his way in his car to a meeting to explain to the residents that the rates had gone down. He broke the back axle of his car because he went into one of the potholes on the road. If there is a second-rate society it is possible to have low taxation. It is a question of private affluence and public squalor.
Any Government who restricted spending on the social services—and this would be the policy of a Tory government—could reduce taxation. The Government have nothing for which to apologise in the increase in taxation. Pensions are 20 per cent. better in real terms than in 1964 and every one of our social services has benefited as a result of increased taxation. Hon. Members opposite promised to reduce direct taxation, but very carefully they specified direct taxation and said nothing about increasing indirect taxation. This will be another method of raising money at the expense of direct taxation. Few hearts will bleed tonight for the supertax payers.
The Budget has been dismissed by some sections of the Tory Press, and by some hon. Members opposite, as dull and unimaginative. I doubt whether this view will be endorsed by the 2 million people who will drop out of the tax bracket, the widows and the fatherless children who will benefit because of the Budget's provisions. The fact remains that an £800 million deficit has been transformed by the Chancellor into a surplus in excess of £500 million and that this year the Chancellor has £230 million which he can redistribute to taxpayers.
We can have a long debate as to whether we distribute this in the correct manner. I have my reservations. Some of the money might have been used to abolish prescription charges. Instead of giving rebates to supertax payers, the £5 million that has been saved might have been added to another £5 million to abolish Health Service charges. The Chancellor said something of significance when he said that he may, at a later stage, use the regulator.
There are many anomalies which need adjusting, perhaps later in the year. In my constituency we are very much concerned about the purchase tax on knitting wool, a comparatively minor item, imposed for the first time last year, which has resulted in a reduction of 25 per cent. in the amount of wool now being purchased for knitting. Millions of women, many elderly, have to pay this tax and it is having a great effect on employment prospects in my constituency. I hope that this will be something which

the Chancellor will consider when contemplating the use of the regulator.
I have also written to the Chancellor about purchase tax on brass band instruments, which is having a big impact on local village bands, particularly in the North of England, in that they have to pay what they regard as excessive tax to renew their instruments. There are many positive things that can be done by the Chancellor at a later stage by the use of the regulator and I hope that he will use it.
If I have any criticism of the Budget it is not how the £230 million is to be distributed, but rather that it does very little to end the inequalities we find in our society. It does little to end the anomaly whereby 1 per cent. of the population owns 46 per cent. of its wealth. I hope that in future consideration will be given to the imposition of a wealth tax, which would make a great contribution towards ending inequalities in society and go some way to redress the balance between the "haves" and "have nots".
I hope that between now and the autumn the Chancellor will consider using the regulator to iron out many of the anomalies that have appeared as a result of the imposition of purchase tax on many articles last year. However, I believe that this wide-ranging attack upon the Government has ended as a damp squib. The Opposition have made no contribution whatever by explaining alternative proposals. All that they can do is to regret the speeches made last year and the year before, prophesying that the Chancellor would never get the balance of payments right.
Now we are faced with the fact that we are on a spingboard, are now seeing the light at the end of the tunnel, and are now seeing the possibilities of expansion for the first time during the last four years. I hope that this Budget will be the forerunner of many others which will endeavour to redistribute and to iron out inequalities in our society.

6.4 p.m.

Mr. T. L. Iremonger: will follow the hon Member for Darlington (Mr. Ted Fletcher) to the extent that he attacks hon. Friends of mine, I know not with precisely how much justice, of having made all these false prophecies in


the past about the outcome of the Chancellor's policies. If, indeed, they were in any measure guilty in that respect, they could not have been half so guilty as the Chancellor.
I have in my hand a quotation from HANSARD, from the Budget speech of two years ago. The Chancellor said then, about 1968:
I certainly hope…we shall be in surplus in the second half.
That was the year in which we had the largest deficit in our history. He went on:
For the future we need…a continuing balance of payments surplus of the order of £500 million…for as far ahead as we can see."—[OFFICRL REPORT, 19th March, 1968; Vol. 761, c. 258.]
I must say to the hon. Gentleman that he is Satan rebuking sin on this point.

Mr. Ted Fletcher: In fairness, the hon. Gentleman should also point out that the Chancellor said that we were in for two years of hard slog.

Mr. Iremonger: That is a very ingenious counter to what was said, but it cannot possibly take away from what I have quoted. I do not want to be unkind to the hon. Member, because I thought that he made a very nice and loyal speech, for which I am sure his right hon. and hon. Friends will be very grateful.
This has been talked about as an election Budget. I suppose that it is inevitable that any Budget should be spoken of in terms of electoral advantage, but that is a little unrealistic. The electorate is far too sophisticated to be particularly interested in the details of any Budget; the Chancellor is far too sophisticated to make any such naïve and unpatriotic calculation. I am sure that the Prime Minister is thinking far deeper and far longer than this.
The Prime Minister, quite rightly from his point of view, is determined to win the election which cannot be deferred beyond next May and it would ill-become us to say him nay in those endeavours. But he is not thinking in terms of election Budgets this year, or next year, if we have one next year. What he will do, and this is was the German Chancellor was over here for, is to drive on and get our European friends to drive on as far as possible with the Common Market

negotiations into the spring of next year to a stage when he can say, "Now that we see how the negotiations are going, I can form a judgment as to the prospects of coming to terms with the European Community. I have tried, heaven knows I have tried, but I have come to the conclusion that it is not in the national interests for us to join Europe." He will then go to the country on an anti-Common Market programme.

Mrs. Renée Short: Whereas the hon. Gentleman will accept whatever happens?

Mr. Iremonger: The Prime Minister would have the support of the hon. Lady for once.

Mrs. Short: He would.

Mr. Iremonger: From his point of view, it would be a very crafty move. If we are talking about elections and electoral considerations in terms of the Budget, let us not deal with triflng amounts of 2d. or 3d. Let us deal with things in a big way, like the Prime Minister, who really is determined to win and is not just playing at phantom politics.

Mrs. Short: Is the hon. Gentleman telling the House that whereas the Prime Minister will weigh the terms and conditions put before him, as he has told the House on many occasions, and will turn them down and say, "No, thank you, they are not good enough", the hon. Gentleman would accept the terms whatever they are?

Mr. Iremonger: I do not think that even the hon. Lady could construe what I said in those terms. Whatever may be the merits of the Budget, one thing hon. Members on all sides must by now have hoisted on board in their contacts with the general public is that the electorate at large is absolutely fed up and bored with what it regards as petty party political point scoring. Budget debates tend to degenerate into the kind of exercise which justifies disgust and contempt on the part of the electorate for hon. Members. But I am afraid that although points are scored they are points on matters which, rightly, deeply and sincerely, divide the parties, and they are not petty. So it is only fair just to rehearse some of the petty, as they would seem, party political points that are made in these debates.
First, I must draw attention to the current balance of payments, because the


Chancellor—and I shall refer to this again in making an assessment of his merit in this respect—has proudly boasted of his large surplus on current balance and is on record as having said that the best guide to current economic performance is the current balance of payments—that is to say, the balance excluding capital movement. It is fair to put on record, and the House should accept this, that over the 13 Tory years the average surplus was £58 million and over the five Socialist years the average deficit has been £77 million.
The Government themselves published, under the patronage of the right hon. Member for Belper (Mr. George Brown)—whose absence from the Government we all regret—when he was the Minister for Economic Affairs, one of their "Broad Sheets on Britain", No. 18 of May, 1968, which, in visual form, graphically demonstrated the entire history of post-war balances on current account. From that it is clear to see at a glance that in Conservative years there was one substantial credit balance after another and that the reverse has been the case under Socialist administrations. Therefore, if the criterion of the Chancellor is to be accepted, this is the most damning and fundamental indictment of the effect of Socialist policies on the national economy.
The second criterion which we have been taught to accept is the criterion of growth, and here, and in successive points, my authority is a series of Written Answers in HANSARD of 18th November, 1969, and 3rd February, 1970. In the matter of growth, it can be seen, if the figures are analysed, that the annual percentage increase in the gross national product per head of population for the years 1958–64, that is to say, the five years before the responsibility of right hon. Gentlemen opposite began, was 3·1 per cent., which was anathemised by the Prime Minister when he was in opposition as being stagnation. In 1964–69 it was 1·6 per cent., and this country occupied the international position which the Prime Minister in his old days of opposition used to call "bottom of the league".
A third petty party political point, if I may score it, concerns living standards and savings which is, perhaps. the most palpable and comprehensible of

the effects of Government economic policy upon ordinary people. If one takes purchasing power per head of the population at constant 1963 prices, the rise in prosperity over the 13 Conservative years works out at exactly 50 per cent. and the rise under the Socialists in their five years works out at exactly 5 per cent. That makes the Conservative record, if it is worked out arithmetically, exactly three times better.
Perhaps even more important, because of the implications for savings in taxation, if one looks at savings, the increases over the 13 Conservative years was 500 per cent. and the increase over the five Socialist years was 10 per cent. That is a pretty good criterion of the confidence of the general public in this country, as well as the lack of confidence overseas.
Fourth, there is a point which, I think, we are entitled to make, since this is a very central concern of right hon. and hon. Members opposite. The unemployment average over the 13 years when my right hon. Friends were responsible was 1·7 per cent. The unemployment average over the last three years has been 2·4 per cent.
Fifth, the annual average rise from 1958 to 1964 on retail prices was 2·5 per cent.; and from 1964 to 1969 it was 4·3 per cent. For food prices, in the first period, for which we were responsible, it was 1·7 per cent.; and for the second period it was 4·1 per cent.
Therefore, on every single point which can be extracted from the official published figures supplied by right hon. Gentlemen opposite the record is a damning one for the Government and one which justifies my own right hon. Friend in pointing to a very much more satisfactory record of achievement.

Mr. Newens: Would the hon. Gentleman not agree that his statistics are highly selective and that if he were to compare, as a number of us have compared, the deficit in the last year of his Government's term of office with the present surplus, this is a much more realistic comparison than those selected statistics which he has just cited?

Mr. Iremonger: The hon. Gentleman is entitled to make that point and I must say that I am almost as bored as the general public is with petty party


political points. But I think that they ought conscientiously to be examined. I know that the hon. Member for Epping (Mr. Newens) has a heart of gold and is the fairest-minded and most decent person one could wish to meet.
I think that the hon. Gentleman is almost as bored as I am with these petty points. But I say to him honestly—and I hope that he will accept this from me—that I went through these figures and analysed them with a genuine conscientious scrutiny to see how they turned out. Had I found figures which were detrimental to my case I would, frankly, have far preferred to have faced and recognised them. But with the best will in the world, I do not think that one can go through the published record and establish a really convincing case which says in the petty party political battle of "Yah, boo and sucks to you"—"Socialist good, Conservative bad".
If one could, I should be very concerned and honestly would not wish to avoid it. But I cannot see that this one year of deficit in 1964—and I shall mention it in a moment on a further point—is the damning condemnation of Conservatives that it has always been made out to be. Everybody knows that we had a deficit in 1959 and 1955 both of which we managed to survive in succeeding years without a devaluation.
However that may be, and however significant the deficit in 1964 may have been, I think that when one comes to petty party political point scoring that is the lowest the smallest and the meanest of all the points that can be scored and I should like to examine it in some detail.
By way of preface, I may say that this point bores people and fills them with more contempt than any of the other petty party-political points which are made. This was brought home to me in watching one of the television entertainment programmes run by Mr. Frost. He had on his programme a great champion of right hon. Members opposite, Lord Wigg, whom I remember well in the House as one of our most venomous and by no means least skilful of opponents.
Lord Wigg put to the audience which Mr. Frost had mustered there the very

point which the hon. Gentleman has made, about the "terrible inheritance of the 13 years and the 1964 deficit". That audience, which I cannot imagine was packed with Conservatives—I am sure that Mr. Frost would have made a great mistake if he had done that—greeted it with a howl of contemptuous derision. I thought then that it is just as well to remember that it does not much matter what hon. Members say; people have their own standards and ways of sorting these things out. It does not wash. They know how many blue beans make seven.
All the same, it is important to put on record just how "phoney" the argument is. It is always best to make a point in favour of oneself, if possible, in the terms used about it by one's opponents. It is best, therefore, to look at the Government's own statement on the economic situation in their previous incarnation, in November, 1964, when they had looked at the deficit. They said, "There is no need for action. The balance of payments will quickly improve without any change of policy". They had been in office long enough to make a sober assessment of the situation, and that was said in their own White Paper.
Later, having considered for 18 months the heritage which they had and which they are now blaming us for, in 1966, when framing their own manifesto with which to appeal to the electorate, they said that Britain had "weathered the storm", and on the day of the General Election, 31st March, 1966, speaking in his own constituency, the right hon. Member for Belper, who was then in command of the entire economic policy and strategy of the Government, used these words:
This time, we cannot claim to have inherited a Tory mess. We cannot come back in 1971 with any excuses".
In November, 1964, the Prime Minister had said.
The fact is that,…so far as the trade gap is concerned…there were reserve; and borrowings more than adequate to meet this, but…there has been this new development arising from confidence factors".—[OFFICIAL REPORT.]
He knew well enough what he meant by that, and, indeed, it was the confidence factors, on the Prime Minister's own admission, which inevitably led to devaluation.
The Chancellor of the Exchequer now has a surplus on current account, at which he rejoices, and quite rightly. I am not sure that he ought to congratulate himself quite as he does, and the House is entitled to examine the extent to which he may properly take credit for it. Let us look for a moment at what he has said, at what he said he would do as instrumental in creating this balance for which he now takes credit. On 19th March, 1968, introducing his first Budget—this is column 264 of HANSARD—the right hon. Gentleman said that it was now imperative to hold the rises in prices, that he would expedite prices and incomes legislation, and he was not satisfied with the 1966 Act.
But he did not do it. He ratted on it. Now, he comes with exactly the same complaint, exactly the same anxiety, exactly the same fear, but he does not this year even say that he will try to do anything about it.
In the next year, having failed to secure the surplus which he confidently predicted for the year 1968, the Chancellor said on 15th April, 1969—this is column 1006—that it was absolutely imperative that he should implement in legislative form the proposals "In Place of Strife". The Department of Employment and Productivity Gazette shows how well founded his anxiety was, for it shows that in 1969 the number of strikes was 77 per cent. higher than in any of the previous nine years.
That, therefore, was the Chancellor's judgment about what was necessary to create the balance which he had failed to create and was hoping to create in the next year. But he did not do what he said was imperative. Therefore, the right hon. Gentleman will find it difficult to explain how he is entitled to credit for the credit balance when he did not do the two things which he said were imperative for it to happen. I think that he has had another accident, for which we must all be grateful.
We know what the Chancellor did do, which at least helped to create the credit balance, but about this he does not boast in the House because of his hon. Friends below the Gangway. He did what the international bankers told him to do. He cut the standard of living of the people, including the housing programme.

This is indisputable. I shall cursorily refer to the points made by hon. Members opposite about the housing programme and their achievement. Quite rightly, they say that they built more houses in one year—or, I suppose they can just say, in their period of Office—than in any comparable period before. They say that, but it is worth looking at what has happened.
First, in plotting the figures on the graph, one has to draw the line which runs up to the promise of 500,000 houses and then compare that with the present figure of little more than 370,000 houses this year. One should note also the precipitous drop in 1968 immediately after the implementation of the Chancellor's promises to the international bankers who lent him the money to bail him out of his trouble. The Chancellor and the Minister of Housing and Local Government came frankly to the House then, as they are not coming now, and said, "To keep the money, and to get more when we want to borrow it, we must cut our housing programme, and our 500,000 target"—which they did not look like fulfilling anyway—"can no longer be held out with hope".
It is no use hon. Members opposite saying that it was all Tory boroughs which did not build houses. Although it is true that there has been an 8 per cent. drop in house building under Conservative-controlled councils, the drop under Labour-controlled councils—I am sure that this is a mean point, but I make it only in answer to the points made against me—has been 42 per cent.

Mrs. Renée Short: Tell us where?

Mr. Newens: Which one?

Mr. Speaker: Order.

Mr. Iremonger: I am sure, Mr. Speaker, that you would not wish me to look through my sources of information in order to say which ones, but, if the hon. Gentleman or the hon. Lady think that I am saying something unfair, they have only to point it out. I would not wish to make an unfair point, but this is a fact which has been recognised. I should not have wanted to rub their noses in it, but the matter has been raised from their benches.

Mr. Newens: rose——

Mr. Speaker: Order. Interventions prolong speeches. A number of hon. Members still wish to speak.

Mr. Newens: Will the hon. Gentleman give the source from which he takes those figures?

Mr. Iremonger: Almost to the point of trying the patience of the House, I have quoted sources and columns in HANSARD for everything I have said. I have not got a note of that, but, in the way that Ministers do sometimes, I assure the hon. Gentleman that if he cares to write to me I shall inform him of that source. I think that the hon. Gentleman knows me well enough to realise that I am not trying anything on.
Of course, the great master stroke for which the Chancellor now takes credit, which made it possible to achieve the present current balance, was devaluation, but we did not hear at the time that this was a master stroke. It was described bluntly in so many words by the present Chancellor, on television, as a defeat. So really, if the only positive act of policy lending with his credit balance for which he can really take credit is what he described at the time as a defeat, namely, the devaluation of the £, then I think that the enthusiasm with which we should cheer his achievements really ought to be a little more muted than it has been on the other side of the House. And of course, he cannot really take credit, either, for the expansion of world trade and United States inflation.
Those are a number of extremely petty party political points which I have been constrained to score, because they are all in answer to points that have been made by hon. Members opposite and they bore me almost as much as they bore the general public. Because the general public has rumbled the Government. It does not want statistics or little points scored to prove that its confidence has now evaporated. Elections are not decided on Budgets or on bribes, or anything like that. I think, Mr. Speaker, that you would not reprove me if I refrained from producing an alternative Budget—it would be a Conservative Budget—but I am sure that if I am reproved, as my hon. Friends might have

been reproved, for not making my Budget statement, I shall not incur your displeasure.

Mr. Speaker: I will not reprove the hon. Gentleman

Mr. Iremonger: Therefore, I will skip my Budget; but it would be a Conservative Budget.

Mr. Marcus Lipton: We know that.

Mr. Iremonger: It would. The hon. Gentleman should not be too sure that everyone on this side would produce a Conservative Budget. It was not done for 13 years. Why should he think that it will be done by anybody but me? We will no doubt merely have a half-baked pink or purple Budget, but that at least will be better than anything we have had from the opposite side.
In judging Budgets for or against, it is the general attitude of the two parties that should be looked at. One should go beyond the details. The hon. Gentleman the Member for Lewisham, West (Mr. Dickens), who is not now in his place, did a service to the House when he looked rather beyond the details of the Budget to the underlying philosophy which inspired it, and complained it was not a Socialist Budget. The hon. Gentleman the Member for Darlington (Mr. Ted Fletcher) followed up the theme and said it was not egalitarian enough, and did not go far enough to create equality or the egalitarian society. I think that that is a right and fundamental criticism from their point of view. But in so far as it went any way in their direction, I think it even worse than I think it bad for other reasons.
Concluding, I hope that when my right hon. Friend is responsible for the Budget he will not be deluded or frightened by the image of the Conservative Party which is produced in the distorting mirror of our opponents into trying to have a Budget which shall be a Socialist or an egalitarian Budget. I am quite sure, as Professor Schoek has recently pointed out, that this sick puritanism of hon. Gentlemen opposite, this yearning for equality and egalitarianism, really has its springs profoundly poisoned by an impulse to punish anything which they consider superior in capacity or quality.
I do not want the Conservative Party, when it is responsible for framing a Budget, to take the same sort of cringing, mealy-mouthed attitude which, quite honestly, the general public has no sympathy with at all. They are not Socialists or egalitarians. They would not vote for us if they were. The Conservative Party has a finer record in maintaining social services and the general welfare of the less fortunate members of the public than any other. The hon. Gentleman may not like it, and he had better not tempt me, otherwise I will give him another recitation of facts and figures. I have nothing to be ashamed of in my party's record.
I hope that when we have a Budget we shall make hon. Gentlemen below the Gangway opposite, when they are sitting over here—some of them have quite substantial majorities—even more angry than they have been in the disappointment that they have suffered in this Budget. We shall have a proper Conservative Budget which will give encouragement to energy, initiative, and enterprise, and will uphold the principles of private property, profits and reward on which the liberties and responsibilities of the community really depend.

Several Hon. Members: rose——

Mr. Speaker: I would remind the House that there are still quite a number of hon. Members who wish to speak. Reasonably brief speeches will help.

6.37 p.m.

Mrs. Renée Short: The hon. Member for Ilford, North (Mr. Iremonger) told us, I think, on three occasions during his speech that he was making a lot of petty party political points. He told us four times, I think, that he was bored and that he was boring us. Who am I to disagree with him? He made it very clear what we are to expect if, by some misfortune, we changed places, and the Conservatives come over to this side of the House after the next General Election: a good old Tory Budget, with rewards for the tough people who are able to elbow their way through life, and the devil take the hindmost, and nothing for the rest, the majority. Well, that is honest, I suppose; I think that people will note it.
We have not really had anything very constructive, as several of my hon. Friends

have said, from the party opposite, about what the Conservatives would do if given the opportunity. The right hon. Gentleman the Member for Enfield, West (Mr. fain Macleod) yesterday made a great play with two planks of the Opposition's programme, that is, the abolition of S.E.T. and the reduction of direct taxation. That sounds marvellous. The abolition of S.E.T. and the reduction of direct taxation would, I suppose, cost the Chancellor between £800 million and £1,000 million, and this, of course, would result in an enormous amount of additional expenditure and spending power being released into the economy. Yet the Opposition are criticising my right hon. Friend for being unable to control inflation. What do they think would happen if their policies were carried out? What sort of situation would we be in then?
I think that the Evening Standard last night took the right hon. Gentleman for Enfield, West to task in plain terms when it asked him what he thought he was playing at. He was contributing to what the hon. Gentleman the Member for Ilford, North was talking about, the debasement of politicians with some sections of the community by making promises before an election which they were quite incapable, and would be incapable, of keeping after an election, if, as I say, by some misfortune they were returned to power.
But the Evening Standard says that Mr. Macleod knows he could not do this; he would not be in the position to do it, and part of it, of course, would be carried out if the Opposition had an opportunity. They are sold on the idea of a value-added tax in place of other methods of taxation. Of course, if the hon. Gentleman and his hon. Friends who are so anxious to get into the Common Market were to be successful, then we would have to have a value-added tax. It would have to be imposed on food and many other things. This would have a very grave effect on the cost of living. But the leader of the newspaper went on to say that
…the political pop he feeds to the television masses is of no real importance anyway. If so, he and his colleagues should stop talking about broken promises and the need to raise the tone of political debate.
I think that that puts it nicely, in a nutshell. Perhaps in due course we shall


hear more realistic figures from the Opposition concerning what they would like to do.
I want to concentrate on a few matters which my right hon. Friend the Chancellor of the Exchequer dealt with in his Budget. I do not want to make any more party political points, because they are sterile—and thus far I agree with the hon. Member for Ilford, North. I shall say something about aspects which please me and about aspects which do not please me in the Budget and raise some matters which I hope my right hon. Friend will take into account when operating his proposals.
I am delighted that he is able to remove 2 million lower-paid workers from paying income tax. It will bring great benefit not only to those workers in full-time employment, but to old-age pensioners who have a small job for a few hours a week which brings in a few pounds on which they nevertheless have to pay income tax. My right hon. Friend said that this would bring benefit to about 100,000 old-age pensioners. Many hon. Members know that this problem occurs frequently at our "surgeries". Pensioners have come to me and have said, "Is it right that I have to pay this amount of tax? Will you see whether my coding is correct?" I am glad that now I shall be able to tell them that, as a result of the Budget, they will not have to continue paying income tax.
I am delighted, also, that my right hon. Friend has decided to seize the nettle of the problem of "the lump". I do not think that any hon. Member in the debate so far has congratulated him on that, and I take the opportunity to do so. This was a burning problem to all of us who know anything about the building industry. We were very much concerned about it. Certainly, the building trade unions were very concerned. My right hon. Friend must also have been concerned, because he has been losing a lot of money because of the lump".
Not only income tax has been avoided by this pernicious arrangement which has grown so considerably during the last few years. Many other payments are dodged in this way, including such things as subscriptions to the National Insurance Fund, contributions to the Redundancy

Payments Fund, contributions to the National Health Service, to the selective employment tax and to the Construction Industry Training Board.
Overall, there has been a very considerable loss as the result of this dodging of responsibility by "the lump". Indeed, the men involved have been denied the cover and benefits which they would have got if these contributions had been paid. Their families have been affected. Many families have found themselves in very difficult circumstances because the men have not been eligible for redundancy payments, National Insurance benefits, and so on.
Perhaps just as serious has been the effect on building standards generally. These men have often not been concerned about safety standards or the finish of the job. All in all, it is a very good thing that my right hon. Friend has seized the nettle and I congratulate him wholeheartedly. I look forward to early discussion of the Bill which is to be introduced by my right hon. Friend the Minister of Public Building and Works to deal with this matter. This is a great step forward.
I am glad that the Chancellor has found it possible, because of the growing strength of the economy, to make some reduction in import deposits. I supported the scheme when he introduced it because it was essential to stem the growth of imports. I am equally glad that he now feels he is in a position to ease off the level of deposits. It is a sign of the growing strength of the economy.
As a West Midlands Member, I would like to have seen some relief to the hard-pressed car industry, particularly the motor-cycle section, because that is in some difficulty. Since my right hon. Friend is also a West Midlands Member, I hoped that he would lend a sympathetic ear to the pressures put upon him by the industry. However, the reduction in import deposits will bring some degree of easement to the industry, because it imports large quantities of materials.
I also congratulate my right hon. Friend on the highly civilised decision to help the commercial theatre by removing S.E.T. from a certain section of staff employed. This has been urged upon him for some time. It will bring the commercial theatre partly but not wholly


into line with theatres supported by the Government through the Arts Council. I would like clarification of what he has in mind here.
The theatre is not in the same position as film and television companies, which are able to claim back the whole of their payments of S.E.T. Why should there be a distinction? Why do we discriminate against the live theatre, particularly the commercial theatre, which is in such a difficult situation for many reasons? I hope that the theatre will be placed on a par with films and television and will be able to claim back the whole of the S.E.T. that it pays. I emphasise that television and film companies are able to claim back their S.E.T. on clerical staff, receptionists and all their other staff, and not only on those responsible for making their films or programmes, such as the actors, producers, and camera men.
In his Budget Statement, my right hon. Friend referred to staging staff—those responsible for staging productions. This clearly means directors, stage managers and actors, and I suppose that it also means carpenters and electricians. Does it also mean those employed in the making of costumes? This work is an essential part of theatre production, as I know from my own work in that department of the theatre over many years. It can be an extremely expensive part of production and staging, involving not only large expenditure on materials but salaries for a considerable number of people employed in designing and making the costumes. I hope, also, for some clarification of this point. I want my right hon. Friend to extend to the theatre the same advantages in relation to S.E.T. which have been extended to films and television, so that this burden can be taken off the theatre.
There is also the very difficult problem of when a theatre is "dark". This applies to many theatres in the provinces. Many of them are "dark" for many months of the year, so that owner-managers cannot get back in full their staff costs and running expenses. Yet they still have to pay S.E.T. I hope that my right hon. Friend will look at this point.
I hope, too, that the relief being given to theatre managers will mean some im-

provement in actors' salaries, which is urgently and desperately needed. I hope that it will mean some increase in the size of companies which theatre managers now feel able to employ and that we shall be able to remove some of the disgraceful business of casual labour in the theatre, with actors and actresses being employed, say, for two weeks rehearsal and two weeks' playing, only to find themselves looking for a job again at the end of it. I hope that greater continuity and longer contracts will be possible as a result of theatre managements having to pay out less on S.E.T.
I congratulate my right hon. Friend the President of the Board of Trade on the part that he has played in greatly improving our balance of payments position. I congratulate him, particularly, on the improvement in our trade with Eastern Europe, the Comecon bloc, but the figure of £240 million is still miles too low. With such an enormous population in those countries, and with their growing standards of living, it is incredible that the figure should be as low as it is. Nevertheless, it is very much higher than it was, and the increase in trade with Roumania for example, has been quite spectacular.
A great deal of this is due to the fact that my right hon. Friend has worked hard in his Department, that he has made many visits abroad, and that he has allowed us to take part in trade fairs in various countries. He has encouraged chambers of commerce and private industry to be much more venturesome and adventurous in going abroad, and it is these visits and the resulting orders which have contributed so much to our improved balance of payments position.
Hon. Gentlemen opposite say that one of their planks is to reduce the rate of income tax. I agree with those of my hon. Friends who have criticised the level of taxation. We would all like to pay less tax, in whichever tax band we find ourselves. It sounds good propaganda to say, as the right hon. Member for Enfield, West did, that we would like to take 3d. or 6d. off the standard rate of income tax, but I wonder whether that is really the best way of dealing with the problem. I think that my right hon. Friend's approach of taking more people out of paying tax by raising the threshold of taxation is far better.
Let us consider the result of the right hon. Gentleman's proposal to reduce income tax by 6d. in the £. A man with two children, earning £20 a week, would get the princely benefit of an extra 3d. a week. His wife would not be able to buy very much with that extra 3d. in her housekeeping money. A man earning £30 a week would get an extra 4s. 1d. A man earning £50 would get an extra 11s. A man earning £100 a week—there are not many people in that category—would get an extra £1 12s. 8d. I therefore think that my right hon. Friend's approach is of more value to the ordinary person in the lower income ranges.
My main criticism of my right hon. Friend's Budget centres on this question of overseas investment. My right hon. Friend said that there had been renewed discussions on this whole question of overseas investment policy, and that he had listened to the arguments put to him by the C.B.I. and others about the value of overseas investment, and the effect of the restrictive measures now in operation. My right hon. Friend went on to say:
As our position improves, it will be right to keep the possibility of relaxations under review. This is a direction in which we shall need to move in preparation for entry into the E.E.C."—[OFFICIAL REPORT, 14th April, 1970; Vol. 799, c. 1227.]
There is in that statement an awful warning for us all. It is something which those who have considered the disadvantages of entry into the Common Market have been well aware of for a long time. Those who understand that there are problems in going into the Common Market, apart from the common agricultural policy, and the effect which that will have on the cost of living in this country, know that there is a provision in the Treaty of Rome for free movement of capital across frontiers.
In 1969, a sum of £593 million was allowed to be exported for long-term private investment. In 1968, which the hon. Member for Ilford, North mentioned as being a year of considerable difficulty for us, with an acute deficit on the balance of payments, the sum that was allowed to go abroad for private investment was £732 million. During the last two or three years we have allowed a greater sum to be exported than was ever allowed annually during the 13 years when the party opposite was in power, and I find this situation impossible to accept.
Had it not been for the export of a considerable amount of capital, our position would have been very different. Even during the difficult period following devaluation an enormous amount of money was allowed to be exported. People say that it brings advantages to us, but these advantages are long-term, if they are advantages at all. The immediate effect is that the money is invested in industry abroad. It provides goods not for us, but for other countries. Above all, it provides job opportunities for the nationals of other countries, while we here have more than 600,000 men and women out of work, and while we complain, as my right hon. Friend did, about the lack of investment in industry here.
Those things do not tie up and it seems to me that we ought to be much tougher than we are about allowing firms to invest their capital abroad. We ought to insist on capital investment being carried out in this country to provide jobs and goods here, goods which we can then export and make a profit from. I disagree profoundly and basically with this part of my right hon. Friend's policy, and I hope that he will not listen to the blandishments of the C.B.I., or anybody else, but will decide, in the interests of our economy, and because of the investment position in private industry here, not to permit this level of investment abroad to continue.
On the whole, I think that my right hon. Friend's Budget is on the right lines. I should have liked him to have been in a position to increase by a greater amount the spending power of the people. The figure of £200 million is too conservative. He could probably have given back £350 million without any danger at all. He could have relieved more people from paying income tax. He could have provided more relief to lower-paid workers and pensioners. I hope that he will be able to provide additional benefits, particularly to old-age pensioners, when he has had a chance to see how our economy develops during the next few months.

7.0 p.m.

Mr. Richard Wainwright: I am glad to follow the hon. Member for Wolverhampton, North-East (Mrs. Renée Short) on one of her major points. In a single breath she included two quite separate income tax reduction


proposals of the Chancellor of the Exchequer. Liberals enthusiastically welcome one, while being somewhat cool about the other.
The working pensioner, to whose plight the hon. Lady referred, will be considerably relieved by the increase in the age exemption limit, which we enthusiastically support. Working pensioners will now largely drop out of income tax, which is to be welcomed, and will also cease to be harassed by the complex method of taxation.
Much is said about the work which devolves upon the Inland Revenue, but we should also spare a thought for the work which devolves upon the taxpayers, especially the elderly ones. The application of P.A.Y.E. to a pensioner, especially if he does two part-time jobs, is cruelly complex. If that paper work goes, so much the better.
The other income tax reduction, which the hon. Lady bracketed without separation with the raising of the age exemption relief, is the Chancellor's massive increase in the single and married allowances. It seems taken for granted that this is designed to relieve lower-paid people with heavy responsibilities, who were described by the Chancellor as being the people most affected by price increases.
My observation in a wholly industrial constituency is that the people who are earning £9, £10 and £11 a week are, for the most part, youngsters more or less starting work and living with "Mum". People living with an affectionate and kindly "Mum" are not greatly affected by price increases. Good luck to them, but I do not see them at the head of the queue of necessitous taxpayers, certainly not in the eyes of hon. Gentlemen opposite, if they are loyal to their philosophy, which is still painted up in all the Socialist halls in my historic Socialist constituency—in some from the days of Tom Mann and in some from the days of Victor Grayson and Philip Snowden—"From each according to his ability".
Young people, without responsibility and earning the good wages of today are capable of paying a modest amount of income tax, and, to do them credit, few of them complain about it. There is everything to be said for keeping them within the tax system and treating them,

as they wish to be treated, as full adult citizens.
Liberals regret that the House of Commons is making no contribution to the important job of debunking the myth of the annual Budget ceremonial rite by taking four days together in the middle of April rather than spreading them over the parliamentary year. We are simply subscribing to this old "seed time and harvest" ritual and leaving ourselves open to the challenge thrown down on 7th April by the director of N.E.D.C., Fred Catherwood, who said that N.E.D.C. is now the main forum for economic debate in this country".
I regret that I find it a little difficult to challenge Mr. Catherwood when we are devoting four days to the Budget, instead of having regular reviews of the state of the economy and appointing at least three Select Committees, on expenditure, economic affairs and the taxation system. When the hon. Member for Ashfield (Mr. Marquand) pleaded last night with his own Front Bench for just one Select Committee on economic affairs, he received no visual response. The Chief Secretary's usual impassivity became quite statuesque.
Instead of employing a useful setting for economic debate, the Conservative Opposition continue to perform this painful ceremony of trying to blow up a huge inflated bogey of Socialism and digging a synthetic trench between the Socialist bogey and the alleged Conservative philosophy. This will not do. This attempt to show that latter-day Baldwins are different from latter-day Ramsay MacDonalds will not wash. Instead of using the time to explain their plans for value-added tax, in which we Liberals would be happy to join in constructive debate, the Conservatives miss the political point entirely by pretending that the Labour Party is still Socialist. The real point is that the Labour Party has succeeded with the balance of payments by abandoning Socialism.
It is a comment on the enormously changed political climate that when Philip Snowden, my distinguished predecessor in the Colne Valley, abandoned Socialism, he was execrated, driven out and altogether ostracised by the Labour Party, whereas when a modern Labour Chancellor of the Exchequer, the right


hon. Member for Birmingham, Stechford (Mr. Roy Jenkins), abandons Socialism he becomes the mascot of the Labour Party and, for the most part, the members of the party fall over themselves to be pleased with him.
The right hon. Member for Enfield, West (Mr. Iain Macleod) diverted the House with his witticisms about the Prime Minister. I would be the last to upbraid the right hon. Member for reminding the House about the Prime Minister's lighthearted attitude to pledges. Many former Labour voters in the Colne Valley rumbled the Prime Minister in 1966, which is more than any Conservative hon. Members can say. In scoring off the Prime Minister, the right hon. Member for Enfield, West no doubt felt that he had avenged himself for the remarks which Lord Salisbury once made about him.
I think that the right hon. Member should also have shown some humility. It is almost paying a compliment to people to deceive them. It does at least show that one thinks they are worth deceiving, and that it is important to win their support. The right hon. Member for Enfield, West has quite different tactics. He does not attempt to deceive; he simply keeps silent. The Conservative plans, apart from a cursory reference by the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin), remain veiled in secrecy, particularly on the issue of value-added tax. I wish that the Conservatives would come out into the open and give some parliamentary time to a thorough discussion of this proposal for which we on this bench have considerable sympathy.
Certain dangers seem to be arising from the formlessness of the Budget speech from year to year. Its range is, rightly, wide, but there is something capricious about the choice of subjects included. Last year, we had a passage of great length about incomes policy. This year, the subject was skated over with the rather remarkable sentence from the Chancellor of the Exchequer that incomes cannot for long continue to rise at their recent rate. How long is "long"?
Having said that, the Chancellor turned away rapidly to world monetary matters. Last year in the Budget speech there was

a splendid passage on social security benefits, and a rise in pensions was announced. This year, when many people who are not affected by income tax are in great need, there was no mention of social security grants. This year, also, we had no indication of any move forward in the Government's policies for exchange rates. The Government's debt to our own devaluation and to the German revaluation was acknowledged, but in an atmosphere of complacency which seemed to suggest that enough was enough and that further currency changes need not be contemplated. That is living in a false world.
The Chancellor of the Exchequer fell into the unfortunate error, to which Chancellors on both sides of the House are prone, of using this discredited business of "fine tuning". I give only one example. An admirable new additional allowance has been proposed for industrial buildings, which is something for which we on this bench have been clamouring for a long time. But this is spoilt by the announcement that it shall last only until 1972.
The Chancellor is granting this allowance for industrial buildings which he hopes will be particularly concentrated in development and intermediate areas, yet it is to last only until 1972. Any Minister who seriously thinks that the average industrialist in the South of England or the Midlands can complete a well-devised plan for moving part of his production to a development or intermediate area, and can get a new factory up in the South Yorkshire coalfield or East Lancashire by 1972, is living in a fool's paradise.
What will happen, as so often happens with Government benefits, is that the allowance will go to those who have already made the decision and who have therefore no need for an incentive. What happened on the regional employment premium will happen all over again. People who have already made up their minds and taken the decision will say, "A windfall has dropped into our laps. We are to be treated as incentive characters, and we shall get a 40 per cent. write-off on the building straight away." "Fine tuning" should have gone by now.
As has been acknowledged, tax changes are governed by the present unfortunate


state of the Inland Revenue. This problem should be analysed. There are two quite separate functions of the Inland Revenue. One is the extremely sophisticated function which is carried out by inspectors and senior tax officers. They are grossly overworked, and have been for a dangerously long time, and it is disturbing that an increasing number are leaving the service. Those who talk about a wealth tax, however admirable in theory this may be, cannot be aware of the parlous state, due to the capital gains tax, of the share valuation division of the Inland Revenue, which is weary beyond measure, is months and months behind and in danger of breaking down.
The second function of the Inland Revenue is wholly clerical, where the staff does not have to take intricate decisions based on complex tax law, but has an enormous volume of relatively simple clerical work.
The state of the Inland Revenue is partly the responsibility of the Conservatives. When in office the Conservatives did nothing to bring the clerical side of the Inland Revenue into the 20th century. The organisation of clerks in a district office was left to the overburdened inspector, who has quite different functions. He was supposed to be a labour organiser as well as a tax expert, and computerisation got off to a timid start. Therefore, today the tax-paying public is increasingly treated to a third-class service.
This is shown by the unfortunate and uncivilised removal of the various reduced rates of tax, of which until recently there were no fewer than three. It is as if Marks and Spencer had grown so tired of clerical work that it had said to its customers, "We are charging the same price for every type of stockings. You will have to take the rough with the smooth since we cannot afford to have our assistants putting different price tags on different types of stocking." This is a sloppy and unnecessary performance.
There used to be three lower rates of income tax apart from the standard rate. The Conservatives started the rot by eliminating one of them, and the present Government have got rid of the other two. I will not go back to what happened when there were three reduced rates, which made the progression of the

application of income tax quite smooth and civilised.
I will give one or two brief examples of what happened when there were two reduced rates of income tax. This was in a period when the standard rate was as it is today, so the comparisons are fair. When there were two reduced rates of income tax, the first time a man came within the tax net and then got a rise of £1 a week he suffered an extra £8 a year in income tax. The same thing happened with his second rise.
For the next three rises he suffered £12 a year additional income tax, and that was the extent of any disincentive there might have been. For the fourth rise he suffered £14 10s. income tax, and for the fifth and further rises he suffered the full £16 15s. a year. In that way his entry into the tax system was cushioned and the whole thing moved with a smooth, progressive effect. But as a result of the measures proposed in this Budget, for every £1 a week a taxpayer gets by way of rise he will suffer £17 a year tax straight away. This is a manifest disincentive and a third-class tax service.
I believe that the only way to relieve the Inland Revenue of these grievous and accumulating burdens which produce such unfair effects for the taxpayer are these. First of all, so to reduce the rates at the top of the tax scale that highly sophisticated tax avoidance, which is so difficult to police and which requires so much Inland Revenue effort, ceases to be worth while. This is easy to achieve because tax avoidance is an expensive, boring and tiresome process. Having some experience as a practitioner, I am sure that if tax rates at the higher end of the scale were regarded as not low but reasonable, a great many citizens would not let themselves in for all the trouble of tax avoidance schemes.
This reduction would have to be paid for. If we want to be beastly to these people, I have no objection to some tax on the conspicuous forms of spending. Preferably, I should like to see it paid for by a general payroll tax, such as we have often proposed, which could be varied according to the economic state of the various regions and for which Reddaway gives some qualified support.
Secondly, I should like to give an example of the way in which a little elasticity on the part of the Inland


Revenue could save them, as well as businessmen, an enormous amount of work. This is in the sphere of depreciation, or what are known in tax terms as capital allowances. What happens at the moment with a typical manufacturing business is that for the purpose of its own accounts each year the plant register is brought out, the company engineer gives his opinion of the physical life to be expected from each machine, and the production manager says when the machines are likely to become obsolete. The whole matter is then discussed with the auditors and a careful and specific depreciation figure is conscientiously arrived at. Perhaps something may be added for luck, but the basis is carefully calculated.
Having done all that, which is a considerable labour, one has to start all over again to please the Inland Revenue. The Revenue then has to do its own set of calculations under the capital allowances legislation. No notice is taken of what the company, with its auditors' approval, charged in its own profit and loss account, but a table of old-fashioned percentages is applied and a whole new set of calculations is used for the tax purposes.
When the Paymaster-General made his statement about the Viyella-I.C.I. proposals I was pleased to hear him say that he was asking the Inland Revenue to put up the depreciation allowances for cotton machinery to the utmost extent which the present state of the law allows. It was apparent that the right hon. Gentleman regretted that this change was strictly limited by the present state of the law. The answer to that would have been for the Chancellor, in his Budget, to say that for new assets, even if he could not have done this across-the-board straight away, depreciation charged in a company's accounts could be allowed fully for tax. No spending bonanza is involved, because to the extent to which a company depreciates heavily it deprives its shareholders of divided cover. This proposal would be a welcome simplification.
On the same theme of reducing the revenue burden, I cannot see any purpose at the moment for the survival of the Surtax Department. Surtax until comparatively recently used to be explicitly a tax on people with considerable capital wealth. It will always be necessary for

the Inland Revenue to have a highly elite corps of officers to keep a strict eye on what wealthy people are up to. This must remain; but the whole position of the Surtax Department's clientele has completely changed with the inflation of salaries. Now, the vast majority of surtax payers are salary earners. They do not need a special and elaborate department to deal with their tax. Apply higher rates if Parliament wishes it, but do not keep a separate department, with the constant movement of files between the district offices, the surtax office, with a whole separate empire to administer a comparatively low yield tax.
I have one more point which concerns national savings. Plainly, the writing is on the wall. The old techniques of national savings are not enough and will appeal less and less to the younger generation who are now taking O and A levels in economics and who understand what money is all about. For this reason we welcome the fact that at long last the savings banks are not to be tied to the absurd figure of 2½ per cent., which does not even take account of inflation. There should also be Government-encouraged schemes for wage earners to invest in industry.
The Liberal Members will join wholeheartedly in supporting the Clause which has been devised by the Wider Share Ownership Council, and which is not in any sense the prerogative of one political party. But, in addition, we believe that a great many potential investors who would be most unlikely to respond to any scheme administered by national savings offices might well become investors if there were some tax-encouraged scheme at their place of work. We believe that it is in the works canteen that these things are likely to be discussed and that the place of work is an important potential source of wage-earning investment.
We should like to see changes in the tax law so that employers who administer P.A.Y.E. would have the opportunity to offer shares to their employees under some kind of blocked accounts scheme so that so long as those shares remain invested and not sold or the money spent, they will be free of tax. We will elaborate this scheme in detail during the debates on the Finance Bill.
The Budget leaves the country in suspense. The whole essence of it is to


leave people wondering what will happen, for better or for worse, during the months to come. The theme of the Budget, unspoken by the Chancellor, but implicit in every word he spoke, was: watch and pray. I fear that it may be necessary, as the summer advances, to pray very hard indeed.

7.28 p.m.

Mr. Alec Jones: The hon. Member for Colne Valley (Mr. Richard Wainwright) suggested that watching and praying might not be desirable. I should have thought that both were desirable at any time of the year.
The hon. Gentleman made many interesting contributions. I share with him a feeling of regret that there was no mention in the Budget of social security benefits. He made the suggestion that the Budget might be superseded by three Select Committees. I think that three may be stretching things a little, but there is much merit in the idea of a Select Committee on economic affairs.
The hon. Gentleman was somewhat critical of the third-class tax service. Surely the only first-class tax service would be one in which nobody paid any tax at all.
I am sorry that the hon. Member for Ilford, North (Mr. Iremonger) is not in the Chamber, because he entertained us at considerable length and stressed that he did not wish to make petty party political points. He showed that he himself is a competent artist on this score, because he painted a rosy picture of economic success and a splendid life under the Tories. If what he said is true, it is difficult for me to understand what happened to the common sense of the British electorate in 1964 and 1966. The electorate in those years did not share the hon. Gentleman's idea of what was the right and proper thing to do.
Earlier in the debate we heard from the right hon. Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), whose remarks, as usual, were appreciated on both sides of the House. He spent some time trying to support the idea that the Tory Party was always concerned with social problems. If so, why during the period that the Conservatives were in power did they do nothing to deal with the pension problem of the over-80s? If they were concerned with

social problems in the housing sphere, why during the whole of their period in office did they do nothing to deal with leasehold problems and other matters?
The right hon. Gentleman suggested that they were always concerned with large families? How many increases in family allowances were made by Conservative Administrations? All these needful cases—the pensioners over 80, large families, and a host of other needy people—were present prior to 1964. They did not suddenly arise when the Labour Government were elected. The fact that throughout 13 years the Tories did little or nothing about these matters is a clear indication of their attitude towards social problems.
During the past three days we have heard or read speeches by my right hon. Friend the Chancellor of the Exchequer and right hon. and hon. Members on both sides. Some hon. Members have blessed the Budget, some have cursed it, and others have completely ignored it, all in accordance with preconceived ideas of what the Budget should or should not do, and in the main supported by very selective figures often contradicting each other.
For some time before I came to this House I taught mathematics—at one time to boys and girls in Bethnal Green and at another to boys only in the Rhondda. While I never found it difficult to teach youngsters how to arrive at averages and percentages, I found it extremely difficult to teach them their significance. The careless abandon with which averages and percentages have been thrown about the Chamber today indicates the need for a few classes for hon. Members of this House.
Like most hon. Members, except the right hon. Member for Kingston-upon-Thames, who seemed to indicate, by refusing to answer the question raised by my hon. Friend the Member for Epping (Mr. Newens), that he wanted to give the greatest tax concessions to the higher paid—he was arguing in favour of granting higher tax relief to those earning £15,000 a year upwards—I welcome the tax concessions in the Budget. I welcome the concession which takes more than 2 million people out of the tax range altogether. I welcome the concession which provides relief—in varying degrees, I agree—to a further 16½


million people. On tax concessions I suppose all of us become like Oliver Twist. "Please, Sir, may we have some more?" is the motto of the day.
Besides our welcome to the tax concessions, another important part which we on this side welcome is that the Budget is designed not to increase prices. This must give some relief to the housewife, who constantly faces the problem of rising prices.
Some hon. Members, for personal reasons, would have chosen other forms of tax relief. Some of us, if we were honest, for political reasons would have preferred other means. But, for social reasons, I believe that further relief needs to be given, particularly to child poverty and poverty in old age.
It is estimated that a quarter of a million children are living below the poverty line. I know that family allowances are unpopular, but if they are the only means at our disposal of improving the quality of life for children living in poverty I believe that we should have taken the opportunity of increasing family allowances at this juncture.
Poverty in old age is probably the most tragic form of all, for many of these old people now living in relative poverty are the very people whose work in the past has enabled us to reach our present standards of living.
The Leader of the Liberal Party referred to the Budget as a mystical rite; my hon. Friend the Member for The Hartlepools (Mr. Leadbitter) referred to it as something rather feudal; and the hon. Member for Colne Valley said something similar today. Whatever the Budget is or is not, I hope that, even though it contains no reference to either child poverty or poverty in old age we shall soon have an announcement of further help to deal with those problems.
I particularly congratulate the Chancellor of the Exchequer on his humanity in removing the condition of total incapacity or full-time employment before a divorced, separated or unmarried mother can claim the £100 additional personal allowance for a young child resident with her.
Last year I played some part in the proceedings on the Divorce Reform Bill, and I came across this kind of case either

by letter or by personal interview. I am convinced that £3½ million is a small price to pay for removing this injustice which has long been endured by the 100,000 women affected by it.
The suggestion has been made by earlier speakers that nobody likes paying tax. But if paying tax is irksome to us—I accept that it is irksome to a greater or less degree to all of us—tax evasion is distasteful. Fortunately, I believe that it is alien to most fair-minded people. Everybody who pays tax likes to feel that all are treated fairly and equally. So I welcome my right hon. Friend's decision to take steps to stamp out the unfair evasion of tax brought about by the spread of sub-contracting. I hope that we can take similar measures to stamp out tax evasion wherever it can be found. I understand that, for technical reasons, the register of sub-contracting cannot be compiled quickly enough and that this measure cannot be effective until 6th April, 1971; nevertheless, I express my regret and hope that we can do it earlier.
As the Member for Rhondda, West I suppose I look at the Budget through somewhat different eyes from those of other hon. Members. Rhondda is a special development area with high and long-lasting unemployment. It has been known by almost every possible combination of the words "development" and "special" throughout the whole of my life with very little difference. So I approach the Budget with a somewhat different attitude from that of other hon. Members.
I point out that whenever this nation has needed coal—in the past the Rhondda has had plenty—it has been provided, whether the need arose in time of war or in peace, at great cost to the miners who dug it out of the ground, and at further cost to the whole community whose environment was polluted in the process of extraction. The Rhondda today still bears the scars in the shape of tips and industrial decay.
A great deal has been done about the clearance of derelict land. Since 1966 more than £250,000 has been spent in the Rhondda alone on this kind of operation. But the fact remains that when the nation needed coal the Rhondda did its damnedest to ensure that the nation got it. That is why people in the Rhondda


believe that they have a special right to took to this Government—indeed, a right to look to any Government, but to this Government in particular—to replace the employment lost by pit closures by increasing industrial development.
Whatever yardstick we use to measure industrial development—whether industrial development certificates, advanced factories or investment grants—everything points to a faster growth in industrial development in Wales today than at any time in the past 20 years. That is why those of us who represent special development areas in Wales are particularly fearful of some of the Conservative Party's talk and of its attitudes towards investment grants, investment allowances and industrial development. This is why we will do all we can to frustrate the attempts of hon. Members opposite to become the Government.
Despite all that has been done, a great deal remains. That is why I welcome the Chancellor's proposal to provide stimulus for investment in industrial building, although this has been criticised by some hon. Members. Today's Times said:
Construction is one of the few industries that stands to benefit directly from the Budget's fiscal and monetary relaxations. The up-grading of builders for priority in bank lending, the cut in Bank rate, and a generous improvement in capital allowances available to clients ordering industrial buildings over the next two years are the most notable stimulants.… Latest returns on industrial development certificates coupled with good pre-Budget orders for factory building may put some strain on the capacity of builders specialising in industrial premises.
The next sentence is important for someone who represents an area like mine:
Nevertheless, there seems some slack to be taken up in the development areas and those intermediate 'grey' zones, where the biggest rates of depreciation will be allowed to clients.
I trust that my right hon. Friend's proposal will enable this slack, particularly in development areas like Rhondda, to be taken up, and quickly, to provide employment for my people.
Industrial development and what the Budget might do about it are not helped by speeches like that of the Leader of the Opposition on Tuesday, the theme of which has been repeated by many other speakers, in which he castigated the Prime Minister for not dealing with industrial relations. I should like him to spell out what he means by "dealing". The tone

of such speeches suggested that if only the wicked workers would not ask for pay rises, or if only the trade unions were brought under control, all our problems would be solved. Industrial relations have two sides, and management is not always the paragon of all the virtues.
Tomorrow I am meeting a group of trade union representatives from my constituency and an employer, because of a proposal to make 220 workers redundant, 128 of them men. This is a serious blow to my constituency, where unemployment is running at 1,800, some of it very long term unemployment. These redundancies have come about not because of trade union activities or exorbitant wage demands, but, according to the evidence supplied by the management itself, because of managerial inefficiency. We cannot afford this inefficiency in Rhondda any more than in Britain as a whole. If our economic growth is to provide the resources which will enable my right hon. Friend in his next Budget to improve the standards of living of us all, this managerial inefficiency must be cut out.

7.44 p.m.

Mr. Maurice Macmillan: I shall be one of those, referred to by the hon. Member for Rhondda, West (Mr. Alec Jones), who ignore the Budget, because I shall speak exclusively on the balance of payments part of the Budget statement. To save time, I shall develop only one main argument, which is large but limited.
It is that the fundamental balance of payments economic strategy of successive Chancellors has been almost totally wrong for many years. They have talked of various methods required to "solve" the economic problem or "solve" the balance of payments problem. The use of the word "solve" in itself is wrong in this context, since it implies a problem in Euclid which could be solved by a sum with Q.E.D. written underneath and then ended, when, in fact, we have had a continuing and varied situation to deal with over the years by varying methods.
Over these years, the methods used by successive Governments and Chancellors have damaged and distorted our economy at home while achieving very little of their purpose abroad. In fact, in dealing


with the foreign side of his business, the badge of the Chancellor should be a don rampant, mounted on a jade, tilting at windmills, because that is about all the good we have done in the past.
This is the first post-war Labour Budget which has not been dominated by a large visible deficit and which has not been devoted almost exclusively—I think that the Chancellor said that half of our resources have been used to this end—to dealing with the balance of payments problems. In fact, this is the first Budget of any Government or any Chancellor which has not in some way been dominated by the balance of payments at least since Lord Amory's 1959 Budget.
Certain comparisons can be drawn with profit to the argument which we have been having this week. There are certain similarities with and differences between the situations then and now. Taking the current balance, for example, in 1958, the very good year preceding Lord Amory's 1959 Budget, it was plus £344 million. In 1969 it was plus £366 million. Yet the visible balance in 1969 was minus £158 million, while 1958 was one of the rare two years which the Chancellor quoted when we achieved a positive balance on visible trade. In other words, a plus on the visible trade in 1958 produced a current balance of £344 million, while a superior current balance of £366 million was achieved with a minus of £158 million on visible account.
This apparent discrepancy cannot be accounted for by looking back at the years preceding these current balance figures. The 1958 plus was preceded by one small minus followed by two large pluses. The 1969 surplus was preceded by one small plus followed by two large minuses. I do not think there is any pattern one can see here that can account for this difference.
We cannot look forward from 1969 except by guesswork. From 1958 that high figure of £344 million was followed by a plus of £143 million and a minus of £265 million; then an improvement to minus £4 million and on to plus £112 million. Looking at those figures, it would be rash for the Chancellor, or any Minister, to assume that the performance of the balance of payments in this year and the years to come will necessarily be more

stable or more assured than it was—and it certainly appeared to be so—10 years ago.
I think it also very rash to assume that the current good figures in any way justify the Government's policies of the past few years. I do not believe one can demonstrate that the present surpluses on the balance of payments, current and basic, for 1969, nor the visible surplus for the first quarter of 1970, are the result of the present Government's policies any more than their equivalents in the past were the result of the then Government's policies. I do not think one can clearly demonstrate just what the effects of the visible balance on either the current or the basic balance are, particularly taking into account the enormous distortions of the pattern of effort, work, investment, savings and the rest that are sacrificed to improve it by the sort of measures we have had.
For the last 10 years the major efforts of the country, its industry, its finance, its workers, its management, its Government, politicians even, have been devoted to the balance of payments. Most of that effort has been put into attempts to improve the visible balance by enormous increases in exports and reductions even in necessary imports. This is where the effort has been right back from the time of the phrase "Exporting is fun" and the pay pause, introduced by my right hon. and learned Friend the Member for Wirral (Mr. Selwyn Lloyd), and then the more savage and violent efforts of devaluation, restraint, loss of savings of the people and all that has been detailed by hon. Members on this side of the House. It has been a really terrible cost under this Government, and was not too good under previous Governments.
The Government are being particularly severe; in part at least, I believe because such evidence as there is indicates that the task of achieving a surplus, or at least a very small deficit, on visible account is getting harder as the years go by. Take, for example, the annual average deficit for the three five-year periods going back to 1955. From 1955 to 1959 the annual average visible deficit was minus £75 million. Over the following five years, 1959–1964, it was minus £252 million. Over the next five years 1964–1969, it was minus £335 million. As the Chancellor reminded us, we have had only two surpluses since 1882.
Yet, looking at the figures one sees no similar regular deterioration in the bank balance, and certainly not in the balance on current account. There is no pattern which one can find and very little relationship between the two. So I think that the indication is that the concentration we have made up to now on the visible side of our effort could have been a tragic mistake, a mistake arising from some rather fundamental misunderstandings of the sort of country we are, the economic life we are leading, and the world in which we are living.
Other evidence points the same way. If we look, for example, at the relationship between the current balance—that is, the results of our trading in goods and services, income from investments, Government spending overseas and so on at the whole current balance visible and invisible and relate to the balance of trade, expressed as the total percentage of imports that are covered by exports, it is very hard, in making this sort of examination, to get any sort of correlation.
I have already quoted the comparison between 1958 and 1969. In 1958 there was a current surplus of £344 million, of which the visible part was the cover of imports by exports of 101 per cent.; in other words, a surplus on trade account. In 1969, with the bigger current balance, the visible component was only a cover of imports by exports of 98 per cent. Over a year quoted by the Chancellor, 1956, the other plus year, the cover was 102 per cent. and the current balance was only plus £208 million. There is no relationship there.
If we look back through the years and take the current balance in the years in which our exports covered 98 per cent. Of our imports, we see that the results were as follows. In 1969 the current balance was plus £366 million. In 1966 the current balance was plus £64 million and in 1963 the current balance was plus £114 million. In all these years exports covered 98 per cent. of imports. There is very little pattern there. Look at the minuses. In 1960 there was a deficit on current account of £265 million. In 1967 it was £322 million, and in 1968 £309 million. All were met in part by exports covering imports to the same per-

centage extent in each year of 90 per cent.
This shows that the visible balance does not have the importance that we are inclined to give it in the balance of payments. There is obviously a need for exports and for a certain stable element; but I do not believe that we can develop our economy at home and achieve the rate of growth which we all seek if we concentrate to the extent that we have done on that last little increase of exports, which is so hard to achieve, which is achieved only at such a high cost and which I believe I have shown is achieved with very little extra effect on the balance of payments situation.
I think that this, in part, is because we have a sort of strange illusion about our position as competitive traders in the world. We tend to believe that in the dim days of the glorious past we used to earn our living by selling our goods abroad, and should somehow be able to do so now. That is totally untrue. In only two or, perhaps, three years since 1882 have we succeeded in selling more abroad than we have bought from abroad.

An Hon. Member: Tory years.

Mr. Macmillan: We have made up the difference in quite a big way by selling services abroad. In the past—a position that we have not yet fully recovered—we have mostly lived as a country off the interest, profits and dividends on money which we had previously invested overseas. The standard of living of our people during Victorian times and from the early days of this century to the last war has been sustained on the development by foreign labour of foreign resources owned by United Kingdom citizens. We have lived on investment overseas.
We hear many comparisons of the United Kingdom's efforts in productivity, management, production and trade with other countries, such as Japan, the United States, Germany and so on. But they are not the same. We were told today that we should be able to match the Japanese effort. But they are not exporters. If we express the foreign trade in and out as a percentage of gross national product separately for visibles and invisibles, we see that Japan's visible foreign trade is about 17 per cent. of


its gross national product and its invisible trade about 5 per cent. Comparable figures for the United Kingdom are 28 per cent. and 15 per cent. Japan's prosperity is based on selling goods at home, not abroad. In the next two or three years the production of Japanese steel will increase by more than double the amount of the United Kingdom current production. This great increase will be achieved not by selling it abroad but by consuming it at home.
What about Germany, which is more comparable to the United Kingdom? Thirty per cent. of G.N.P. is visible overseas trade and about 10 per cent. invisible. Germany does not operate a reserve currency and so does not have that problem, with its effect on overseas trading.
The United States, which does, like the United Kingdom, operate a reserve currency, is totally different in both size and scale. Her visible trade overseas is a tiny proportion of G.N.P.—7 per cent. in the terms I have calculated, compared with Japan's 17 per cent., and Britain's 28 per cent., and her invisible trade is only 4 per cent.
But all those countries have one thing in common in which they differ from us. They put their main effort into that line of business where they are already successful and their volume is greatest. The difference is that whereas in the United States there is more visible than invisible trade, and in Japan and Germany the same, it is their visible trade which is profitable and their invisibles which make a loss. The United Kingdom cannot hope to make a regular profit in its ballance of payments on its visible trade, but that is still a higher proportion of our total effort than our invisible trade—28 per cent. visible, 15 per cent. invisible. Our real solution is to try to increase our invisible trade so that it becomes nearer in volume to that of the visible; in other words, develop what is profitable rather than that which is not.
My hon. Friend the Member for Wan-stead and Woodford (Mr. Patrick Jenkin) developed an argument about the Government's record of spending overseas. It is worth remembering that it is Governments that tend to spend money on invisible account and private enterprise that tends to earn it on the sale of ser-

vices overseas. My hon. Friend reminded us that Government's increasing expenditure has from time to time been rescued by equivalent increases in the income from private services and transfers earning money overseas. I emphasise the importance of the sale of services, the invisible trade, in relation not only to their volume but their profitability.
Let us consider another side of invisible trade, our income from abroad in interest, profits and dividends on past investment. Table 17 of the White Paper shows the discrepancy. On the private side there is the credit of £1,272 million and debit of £471 million; while on the public side the debit is bigger than the credits at £370 million compared with £41 million. I am not blaming the Minister or his Government for this. It is a fact of life that Governments inevitably spend money abroad and industry and enterprise, such as insurance, earn it. It is therefore important that in their policies at home and abroad the Government limit their own expenditure as far as possible and develop the earning capacity of industry and business generally.
I now turn to the whole question of investment overseas. It has been suggested that in the past the Government—and, I am bound to admit, previous Governments as well—have been over-hostile to the whole concept of investment abroad. I quote from Budget Statements by successive Chancellors in the present Government:
I intend to reduce the net outflow of long-term capital from this country by at least £100 million a year."—[OFFICIAL REPORT, 6th April, 1965; Vol. 710, c. 244.]
With the help of the steps I have taken to moderate private investment abroad, the net outflow of private capital was small, and the deficit on long-term capital as a whole was reduced to £128 million."—[OFFICIAL REPORT, 11th April, 1967; Vol. 744, c. 975.]
Later statements by miscellaneous Chancellors also show the desire to use as major instruments of policy strict limitation of the outward flow of capital.
My right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter) made this point on the present restrictions on investment, particularly in the developed countries of the Commonwealth. Fortunately, despite the efforts of successive Governments over the years, by and large private investment


overseas has managed at least to keep pace with the inflow of private capital into this country. That is obviously very necessary if the return flow of interest, profits and dividends over the years is to be kept as a plus rather than to be allowed to deteriorate into a minus.
I have told successive Chancellors that they should look more carefully at the whole sum. If we take in any one year the net figure of the inflow of private capital investment into this country, the outflow from private individuals in this country investing their money abroad, and the movement of interest, profit and dividends inwards and outwards in that year, the net figure has always been a plus right back, I think, to the war. Therefore, whatever the difficulties with other sections of the economy and balance of payments difficulties, investment overseas, if looked at as an entity, has been self-financing. It may be said that it is better that it should not be self-financing but should be financed in another way and the money used differently, but the point is that it is not. Therefore, it has not in itself been a net charge on the earnings in any other sector.
The more recent figures show a steady net increase. That is, the net amount of British investment abroad was greater than foreign investment in this country right up to 1969. In Table 20 we see a plus figure of £116 million. I think that I remember during these debates an hon. Member opposite saying that this was represented partially by an abnormal sale of portfolio securities somewhere. Certainly the 1969 figures show a very sharp drop in United Kingdom portfolio investment overseas, from £233 million to £2 million, and there may be a special factor in that drop.
Apart from that, there is a new aspect of this part of the balance of payments figures. Under the heading of private investment from abroad into the United Kingdom are two new items. These are public sector issues abroad totalling £55 million, and public sector borrowing abroad totalling £21 million. No one would quarrel with nationalised industries being included in the private sector for this purpose, because they are borrowing abroad as businesses and not as part of the Government.
Last year there was this extra amount of foreign investment here, which could not be expected to occur the previous year, when the public sector was not allowed to borrow in this way. It totalled about £76 million. But this still leaves an extra £40 million unaccounted for, which I deeply regret; if it is a sign of a trend it is a trend which may do nothing but damage to the future prospects of our balance of payments. It will be damaging one of our main sources of income, that of investment abroad.
I do not think we can sustain for one moment the concept that British investment overseas can be afforded only out of a balance of payments surplus, because otherwise it will be a drain on the reserves. Mr. Conan, I believe, totally demolished that argument some years ago and showed quite clearly that there is very little connection between the size of a balance of payments surplus or deficit and its effect on the reserves. There is very little correlation.
I do not really regard the repayment of debt or overseas investment as being directly affected by the balance of payments situation as shown in the current and long-term capital account. I do not have time to develop this argument but it is fair to say, to telescope the argument, that most of the checks on our growth and development have derived from practices which have developed overseas and been imported into this country through what might be called our banking function in providing one of the reserve currencies. I do not think that they come from the effect of our trading position in goods and services and investments on the balances in the world situation.
The problem is that our reserves are not big enough for both. The difficulty, when we come to try to expand the economy, is that we require what in commercial terms would be "bridging finance" and very frequently the economic circumstances of the world put too big a strain, through our banking function, on our reserve system to enable it to provide that bridging finance. That is what I mean when I say that I thought the connection was indirect rather than direct. I said earlier that I believe it lessens the importance of exports as a marginal factor in our balance of payments situation.
Of course exports are important, and of course it is absolutely necessary that they are not allowed to fall below a certain point. But if we make the effort to try to raise them too high that effort in itself is so disruptive that the extra earnings are not worth while. There needs to be a far more careful study of the relationship between the visible and current balance, which I have shown this evening to be of an odd, eccentric pattern. There is a relationship between the current balance and the basic balance which in its real effect must depend upon whether the difference between them is caused by spending abroad or investing abroad. There is a difference between spending and investment. There is a relationship between the basic balance and the reserves which has been demonstrated to be obscure and by no means easy to analyse.
Because of all this we have failed to realise the importance of maintaining a steady and increasing rate of overseas investment. This has had considerable consequences on the pattern of investment and industrial policy at home which I will not pursue tonight. In this process we have concentrated our efforts in the wrong place. The United Kingdom is in business in several ways. We are traders in goods, and we normally do not make a profit on that trade but it does pay a good deal of the overheads. We do not want the loss ever to be too big. We are in business as traders in services, and here we are profitable. This is one of the activities which we should seek to develop because it is where we can really earn money.
We are also in business in investment, holding assets in foreign countries. Here again it is important that we develop at least as fast as and preferably a good deal faster than the increase in the holdings of foreign countries and foreign citizens in this country, so that we can continue to earn a net surplus. There is a little extra spending abroad, excluded from this analysis, largely by the Government, which is obvious. There is another function we have, which is involved in our reserve currency rôle of being bankers, in my view on a very inadequate working capital.
If we understand the situation we can very much lessen the criticisms that

derive from having a trading deficit or even a deficit on basic balance. It is part of a normal pattern of this country's life and development. If we do tell the world that the figures show that the country is doing badly, instead of that the Government and the House have misinterpreted their meaning, we are wrong. We should present the case more accurately, concerned not so much with reconciling records and figures but rather with using them to demonstrate reality, we should concentrate our productive effort on that part of our activities which can and does bring us in a high return.
Even then we shall not "solve" the balance of payment problem; but we shall put ourselves in a position to deal with our financial and economic situation in the world without the constant disruption of our productive, inventive and development efforts at home, which is what successive Governments since the war, including this one, have totally failed to do.

8.20 p.m.

Mr. Roy Roebuck: I shall not follow the hon. Member for Farnham (Mr. Maurice Macmillan) in his riveting dissertation about Greek mathematics, nor shall I immediately offer any comments about his interesting and unorthodox views concerning the balance of payments, although I hope to make one or two remarks on that subject later. I agree with the history that he gave the House about the nation's imports and exports, but I disagree fundamentally with the conclusions to which he came. It is precisely because Conservative Governments, during the 1950s, failed to recognise the changing patterns in the world that we reached the appalling state of affairs in 1964, when we had such a massive balance of payments deficit.
Nor can I agree with wthat the hon. Member said with regard to what Governments do and what private enterprise does. He gave rather respectable currency to the four-ale bar fiction that Governments spend and private enterprise earns. This is not true today, nor has it been true in our history. With his vast expertise the hon. Member ought to study, for instance, the history of the East India Company. The basis of much of our prosperity in the last century and the earlier part of this one was the assistance


which Governments gave to what has been described by the right hon. Member for Enfield, West (Mr. Iain Macleod) as the merchant venturers.
These activities were carried out with great assistance of the Government, often at the behest of private enterprise. Today, private enterprise sells abroad, very often with Government help. Our embassies abroad afford great assistance to the salesmen of private enterprise at no cost to the companies concerned. We all know that businessmen are constantly in a queue outside the Ministry of Technology seeking large sums of money. They will not tell the public about that; they go there privately, hold out their begging bowls and get vast assistance from public funds. Then they go to various other places and complain about this wicked Socialist Government. There is no validity in the hon. Gentleman's remarks on that point.
On the last occasion that I had the temerity to offer a few comments on economic and financial matters during a debate in which my right hon. Friend the Chancellor participated, Mr. Norman Shrapnel, the distinguished parliamentary correspondent of The Guardian, drew a distinction between my right hon. Friend and me. He said that my right hon. Friend reminded him of an Epsom racehorse while I reminded him of an old dray. I am rather hoping, after my right hon. Friend's two-hour slog round the course on Tuesday, that Mr. Shrapnel may be tempted to reverse his respected opinion. If he does not, I suppose that he runs the risk of being described as an old Cross Street hack.
Not that I have very many complaints about my right hon. Friend's Budget. It is a prudent and honest one. Nothwith-standing the occasional Veuve Clicquot image, and the occasional speech in favour of the permissive society, those of us who have studied his biographical writings will recognise that he has every suburban virtue—he is, in fact, Mr. Smith, of Acacia Avenue, writ large. He is certainly no gambler, unlike many right hon. Gentlemen opposite when they had control of the nation's finances.
It was prudent of my right hon. Friend not to be tempted to fritter away the hard-earned gains of the last two years, and he has clearly had a thought for the nation's long-term interests. It was honest

of him not to be tempted to follow the electioneering of Conservative Chancellors who, since 1955, manipulated the economy not in the interests of the nation, but in the interests of Conservative Central Office.
Nevertheless, I have three small criticisms of my right hon. Friend's proposals. First, something more positive might have been done for wives whose earnings put families into the surtax bracket. My right hon. Friend has dealt with such families indirectly, but something more positive should have been done to encourage professional women to use their skills, particularly this year, when we have the Equal Pay Bill before us. Under the present system, working wives with high earnings are worse off if they live with their husbands, with benefit of clergy, than if they do not and this is an anomaly which ought to be ended as soon as conditions permit. I do not know whether my right hon. Friend has given any thought to this matter. Perhaps this is one of the things he is keeping in mind during the year should things improve. If he feels confident enough, he should make some further easements in the interests of equity.
My second criticism relates to the imposition of selective employment tax on working wives of this type. S.E.T. is an absolutely first-rate tax and those of us who have said so for some time have been confirmed in our opinion by Professor Reddaway, an independent source. I am astonished that many hon. Gentlemen opposite who kept pressing at Question Time for the publication of his report should have shown such dismay since its appearance.
The report substantiates every claim which has been made by my right hon. Friend and others on this side of the House. But I have this criticism about the tax. A highly-qualified woman who wants to go out to work—and it is in the nation's interest that she does—and has to employ a nanny or a child-minder—must pay selective employment tax on the wages of that nanny or child-minder. This is unfair and is a disincentive to highly-qualified women to use their skills. I should have thought that it would have been easy for my right hon. Friend to devise a proposal which would exempt such people from paying the tax.
My third criticism relates to the balance of payments. My right hon. Friend took considerable and justifiable pride in the astonishing turnround which has resulted in a bumper balance of payments surplus. He rightly attached considerable importance to this, but if we enter the Common Market on the basis of present terms the balance of payments surplus will vanish in a flash.
I was surprised that my right hon. Friend did not dwell on that point. Perhaps he felt that my right hon. Friend the Minister without Portfolio, my right hon. Friend the Member for Stepney (Mr. Shore), had dealt with it adequately in his speech in Manchester some weeks ago. But it would have been comforting to have had the Chancellor's endorsement of that sensible speech. I should like him to have given us a word or two on the dangers to the balance of payments which a precipitate joining of the European Economic Community would involve.
It would not only be the balance of payments which would suffer if we did that. The price of food would rise enormously, so that it would cost each family in the country about £2 a week extra. I shudder to think of the inflationary effect which that would have. We have heard, during our deliberations on the Chancellor's speech, about the dangers of wage inflation. We could not expect people to suffer the big increases in food prices without demanding higher pay. That, in turn, would have a disastrous effect on the unit cost of production.
Those are my criticisms of the Chancellor's speech. I do not think that the criticisms which have been offered by the principal spokesmen for the Opposition have a great deal of validity. I got home from the House rather late last night and was alarmed to discover that the television was still on and that the right hon. Member for Enfield, West was there pictured. I was happy, however, that the broadcasting authorities had put him on late at night when the children had gone to bed because he has rather a frightening aspect when making gloomy prognostications; and he was at it again last night.
Many of those watching would not be able to compare the prophecy he was

delivering with his previous prophecies, which have been proved wrong. It was appropriate that the programme which followed was called "Shine a Light". It is quite easy to shine a light on the right hon. Gentleman's veracity by consulting the record—if one considers, for example, what he had to say after the last Budget. He then said that it was "a defeatist Budget of a defeated Government".
Since then our balance of payments surplus has soared and our exports have forged ahead, and my right hon. Friend has this year been able to make some tax reductions. The last financial year has seen a magnificent recovery in our economic standing in the world and there can be no doubt that we are now probably the strongest economy in Europe.
Another test of the right hon. Gentleman's forecasting is his observations about the imposition of the betting tax. I well recall that he said that the tax would not work at all and that it was dreadful. But it has worked very well; it is the only non-inflationary tax which we have. I should have thought that that would have appealed to the right hon. Gentleman, who was so concerned in the House the other day and on television last night about inflation.
The Opposition's attack on savings has been particularly "phoney". They have concentrated attention on national savings. But more people each year are using more sophisticated forms of saving—buying units in unit trusts, buying life insurance, and so on, instead of putting money into National Savings through the Post Office or the Trustee Savings Banks under the old system. More are now in occupational pension schemes.

Mr. John Biffen: Do I understand the hon. Gentleman to be arguing that the more sophisticated people become the less disposed they are to lend their money to the Government?

Mr. Roebuck: No. I am saying that the more sophisticated people become, the more they seek different avenues for investing their savings. If the hon. Member for Oswestry (Mr. Biffen) is suggesting that National Savings have attracted too low a rate of interest in the past, I agree. They have, but attempts were made in the last Budget to deal with that problem, and I hope that we have not seen the last of attempts by the


Government to encourage that form of saving.
With the greatest respect, I can only say that it is absurd to imagine that, because there has been a fall in National Savings, all forms of savings have been reduced. It is demonstrably not so. As I say, more people are putting money into unit trusts—there has been a great mushrooming there—and into life insurance, and many more people are buying their own houses, which is a form of saving for old age, which has received positive encouragement from the Government. We have built far more houses than did hon. Members opposite when they were in power. It follows that, if people are buying their own houses, they may well have rather less to put into the Post Office. But it does not affect the national economy in the way some hon. Members opposite seem to suggest.
The Leader of the Opposition's attack on the Budget proposals was wholly unconvincing. On Tuesday, he displayed a rather flattering concern about my constituency and ventured a few prognostications about my electoral fate. If he had been a more prudent man, he might have waited until we had recounted the votes in the Greater London Council elections before attempting any theories about that. The right hon. Gentleman's forecasts about my electoral future are as wildly inaccurate as his forecasts of economic trends.
The right hon. Gentleman concentrated most of his fire on wage inflation. I imagine that there would be few on this side who would deny that that is a serious problem, but in his assessment of the situation the right hon. Gentleman left out of calculation the fact that there had been wage inflation elsewhere, particularly on the Continent of Europe. We must balance the wage inflation in other countries against wage inflation here in order to arrive at a proper assessment.
The right hon. Gentleman made a wide general attack on recent wage increases. Unfortunately, he was not specific about which wage increases he thought deplorable. Most of the recent big pay increases have received applause from many hon. Members opposite. indeed, many hon. Gentlemen, with, if I may say so, a good measure of hypocrisy, were urging my right hon. Friends

to give more to the teachers. We have given the teachers, quite rightly, an astonishingly big increase, and they were entitled to it. Also, we have given the nurses a big increase, about 20 per cent. I do not know whether right hon. and hon. Gentlemen opposite are opposed to those big rises for teachers and nurses.
Many hon. Gentlemen opposite with military experience supported the proposals of the Secretary of State for Defence for increases in Service pay. When Service men received a big pay increase, no one applauded it more than the hon. and gallant Member for Winchester (Rear-Admiral Morgan-Giles), who has such a distinguished Service record. Is the Leader of the Opposition suggesting that the Services should not have had a big pay increase?
Do right hon. and hon. Members opposite argue that the police should not have had a big pay increase? There has been a good deal of criticism, particularly reckless criticism, from the right hon. and learned Member for St. Marylebone (Mr. Hogg), about the state of the police forces. He wants more policemen. So do we. We have provided more policemen. But there is only one way to keep them, and that is to offer them good salaries. We have done that. Do right hon. and hon. Gentlemen opposite feel that the inflationary effect of the increase for policemen is not worth while?
What about the dustmen? Does the right hon. Gentleman think that the dustmen were not entitled to their rise? Or the London bus drivers? Every hon. Member with a London constituency knows that there is a great shortage of bus drivers in London. Do the Opposition suggest that they should not have had a pay increase?
If the Opposition are saying that there should not have been these pay increases, how do they suggest that they should have been stopped? There was no sterner critic of the Government's prices and incomes policy than the right hon. Gentleman the Member for Enfield, West, who speaks for the Opposition on financial and economic matters.
The conclusion I am drawn to is that hon. Gentlemen opposite want to revert to the system of the 'fifties, in which public servants always had to stay right


at the end of the queue so that their pay increases lagged behind those of productive workers, and indeed, when they got the increases, they did not match those of productive workers.
I feel that the Leader of the Opposition and hon. Gentlemen opposite should take this challenge seriously and say which of those recent pay increases they would have stopped. Possibly they would have stopped the nurses' increase. I say that because there is a precedent for it. The right hon. and learned Gentleman the Member for Wirral (Mr. Selwyn Lloyd) once refused—I think, about 1962—a miserly increase in nurses' pay. By a process of deduction, I might presume that that would have been the principal increase which hon. Gentlemen opposite would have sought to stop.
My right hon. Friend the Chancellor rightly claimed that no one would be worse off as a result of his proposals. That is certainly true. I do not think that anyone can challenge that. It is also true that many people will be better off as a result of the Budget. I think that more people could be better off, and I refer particularly to those people buying their houses on mortgage, because Bank Rate has now been reduced, in a period of weeks, by 1 per cent. But as yet there is no sign from the building societies that they are to drop their rates appropriately.
I find this astonishing, because when Bank Rate goes up, the building societies instantly put up their rates. This is almost a natural law, like the sun following the moon, or the moon following the sun—I am not quite sure. But it does not appear to work in reverse, and I wonder why. Certainly, my hon. Friend the Member for Lewisham, North (Mr. Moyle) agrees with me about this, and perhaps the House would like to know that we have tabled a Motion urging building societies immediately to reconsider their mortgage rates. I am sure that hon. Gentlemen opposite, who always exhibit such a concern for the owner-occupiers, will rush to the Table Office tomorrow to add their names to the Motion.
In considering what the Opposition have had to say about my right hon. Friend's proposals, it is instructive to

imagine what sort of proposals they would have introduced, and in doing this I was greatly aided by a recent article in the Daily Telegraph by Mr. Andrew Alexander, that well-known former Young Conservative. He went to the trouble to cost certain of the Opposition's proposals, particularly with regard to maintaining a presence east of Suez. It is clear from that interesting analysis, from a very good source, that their proposals are such that it would have meant a considerable increase in taxation.
We have also had the other proposals from right hon. Gentlemen opposite about a value-added tax. I thought that the right hon. Member for Enfield, West was particularly slippery the other day when he was challenged by my hon. Friend the Member for Manchester, Wythenshawe (Mr. Alfred Morris) to say what had happened about the report which had been commissioned by the Opposition. I wonder where it is. My information is that it is under wraps in the Leader of the Opposition's room. I really do feel that he ought to produce it quite soon so that we can examine the proposals it contains.
The right hon. Member for Enfield, West, said, when challenged by my hon. Friend the Member for Wythenshawe, that V.A.T. had been introduced in some Scandinavian countries, and he seemed to think that that therefore gave it some sort of validity. Of course, it was recently introduced in Denmark, and as a result prices there have gone up by 7·9 per cent. So this is the sort of thing one could expect from the Opposition.
My conclusion is that the Conservative critics of the Budget lack credibility. Their record as prophets of disaster is particularly disastrous, none more so than that of the Leader of the Opposition, who described last year's Budget as the fag-end Budget of a fag-end Government. He has been a bit stuck for damning phrases this year. My right hon. Friend, with his proposals, has turned hon. Gentlemen opposite into a gaggle of impotent Cassandras.
The Budget points the way to prosperity. The mess which the Tory Party left behind is almost cleared up, and my right hon. Friend the Chancellor deserves the thanks of the nation. I am quite confident that these will be forthcoming at the next General Election.

8.45 p.m.

Mr. Bernard Weatherill: rose——

Mr. Deputy Speaker (Mr. Sydney Irving): If the hon. Gentleman, in view of the injury to his leg, finds it more convenient to be seated while he makes his speech, I am sure that the House would allow that indulgence.

Hon. Members: Hear, hear.

Mr. Weatherill: Thank you, Mr. Deputy Speaker.
A great deal of play has been made today about the boredom which the public feel with the scoring of party political points about who created the deficit. The hon. Member for Harrow, East (Mr. Roebuck) has not been with us all day. If he had been, he would have heard many of his hon. Friends and also my hon. Friend the Member for Ilford, North (Mr. Iremonger) take up this point.
I do not propose to react to the rather silly remarks which the hon. Gentleman made about the Conservative Government fashioning their Budgets to assist or please Conservative Central Office but I shall follow him in the question of what we would do were we given the opportunity. The fact is that we are not yet the Government. I have no doubt that by this time next year we shall be, but I am afraid that the hon. Gentleman will not then be here to criticise us.
I do not so much wish to criticise the Budget as to put some constructive suggestions to the Government. First and most important, we are all, on both sides of the House, delighted that the balance of payments is in such a healthy condition. I do not think that it matters two hoots who is responsible. All we are concerned about is that we wish to keep it that way.
It seems to me, therefore, that the great omission of the Budget is that no credit is given to those principally responsible for this improvement. All Governments talk glibly about having got the balance of payments right, but Governments do not do anything of the kind. The present surplus is entirely due to our businessmen and industrialists, and they should be given the credit. It is, therefore, a surprising omission that nothing is done in the Budget to encourage

the very people who have done so well for us and help them do even better.
I want to confine my remarks to one section of business—the smaller company. Here I must declare my interest, in that I run my own company. I well remember that after a modest victory during the passage of the Selective Employment Payments Act I said to my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) that I did not like to speak in the House unless I had specialised knowledge. He replied that he did not think that I would, therefore, speak very often. Almost immediately after that, I was put in the Whips' Office and have, therefore, not had much chance to speak anyway. But I can claim to speak with some specialised knowledge of the problems, the aspirations and the grouses of the smaller businessman.
I maintain that under this Government the small businessman has had a very raw deal. One reason for that, if not the principal reason, is that he is grossly under-represented in this House. Another reason is that there are too many organisations outside the House who speak up for him, and speak with different voices. What the small businessman needs is first, a kind of C.B.I. for small businesses which will speak up for him. Second, he needs more representation in this House.
I have always believed that if the close company provisions of the 1965 Act had affected big businesses, or the unions, or farmers, or the lawyers, who are so well represented in the House, there would have been such a row that they would never have been introduced in their form. It is true, and I give the Chancellor credit for this, that in the last Budget he realised the folly and impracticability of the sections dealing with the directors' ration and with the tax relief on loans for directors. It is a pity that for about four years we who run small businesses should have suffered from these two pieces of very unfair legislation. They could only have been introduced by those who are completely out of touch with business reality, but they have gone, and we are grateful.
But the shortfall provisions remain, and under these a close company is forced to distribute 60 per cent. of its profits after tax, unless it can be proved that such money is not required for the maintenance or development of the business.


This means, in effect, that it is impossible for a small company to build up money for future projects, or at least projects which have not yet reached a definite stage, and it is forced to distribute this money, which is in effect savings, as dividends. In addition, income tax and surtax have to be paid on the distribution. The plain fact is that, in practical terms, the shortfall provisions can in certain circumstances make it beneficial for a company to be wasteful in its expenditure in order to avoid a shortfall direction.
It means, too, that many small companies are forced to live on overdrafts which, though they will be slightly less expensive at 7 per cent.—and for that one must be grateful—up to now have been very difficult to obtain. I simply make the point that it is not so much the cost of an overdraft which is penalising small businesses as the fact that they cannot get the overdraft facilities at all, and I hope that some easing in this respect will result from the Budget.
To return to the shortfall provisions, the reason given at the time for the introduction of these was the fear that revenue would be lost if cash were built up in a private company, which would thereby avoid income tax and surtax. If that company does accumulate cash, such accumulation will ultimately be liable to capital gains tax.
Let me give the House a simple example. If a company keeps £100 of its profits, 45 per cent. of that will go in corporation tax. That leaves £55, on which, ultimately, 30 per cent. will be payable in capital gains tax. Thus, on that total of £100, there will be a tax of 61·5 per cent. But, if the compulsory dividend payment is carried out, the total tax will be just over 65 per cent. There is, therefore, not very much difference in the calculation.
In any case, that loss of revenue argument presupposes that all close companies have shareholders who are liable to tax at the standard rate. I wonder whether any research has been done into this, because it is unlikely that more than half, at most, of the shareholders in these private companies would be liable to surtax. In many cases shareholders would not be liable to any income tax. Every year close companies would apply for clearance and try to free themselves

from these shortfall provisions. This involves considerable work, not only for the Inland Revenue and the company concerned, but also for the professional advisers.
The Small Businesses Association estimates that, at the minimum, the average cost to the average small company would be £15 per annum, and that is a total of £2½ million a year in totally unproductive work, excluding the Revenue work. I appeal to the Treasury Bench, having made such a good start last year, this year, to finish the job and do away with the shortfall provisions as well. If necessary, I suppose one could always return to the old surtax directions for private companies, which worked well and fairly.
My only other point is on estate duty. The Chancellor of the Exchequer is raising the rate of unpaid duty from 2 to 3 per cent. Although that is in itself equitable, it will often hit small companies very savagely. As the Financial Secretary to the Treasury well knows, a considerable time is often taken to value the shares of a private company, and it is exceedingly difficult to raise the money for death duties, especially if there is an assets valuation or if the company has to be sold. I ask the Chancellor of the Exchequer to consider making some concessions to ease this very real problem.

The Financial Secretary to the Treasury (Mr. Dick Taverne): The hon. Gentleman is putting his case very moderately, but is it not also fair to consider that if the company is carrying on business it would at the same time be earning? There are very few non-earning assets involved, and this arises only in the case of land.

Mr. Weatherill: Nevertheless, I still think there is a strong case for looking at this and making a concession.
The farmers are entitled to an abatement of 45 per cent. on death duties on their agricultural holdings. Would it be possible—I put this as a suggestion—for the holders of, say, 10 per cent or more shares in a private company, or a partnership, or a sole trader to be entitled to an abatement? I have no idea what it would cost, but it would be interesting to find out. This certainly would go a long way towards easing a difficult problem.
Secondly, could not estate duty on any holding in a private company be payable


in 10 annual instalments, as is at present applicable to realty?
Thirdly, where shares are left in trust, with the income to a widow, would it not be possible for duty to become payable on the widow's death? It is not possible for a director with 5 per cent. of the shares in a private company to have a "top hat" policy, or a policy which carries death benefit? Widows are often left in difficult circumstances. Under the present regulations, the children gain, because the death duties have already been paid, and the widow suffers.
Small firms have had a rough deal. This is, perhaps, not the moment to go into the advantages or disadvantages of scale, but it is often said that over 50 per cent. of our exports are attributable to 100 large companies. If that is true, it must equally be true that there is an enormous potential in the thousands of smaller companies to improve their performance if they were given the right kind of encouragement. We should not be bemused by exports alone; many small companies are doing an equally good job in keeping imports out.
In 1963—the latest figures I could get—there were 729 compulsory liquidations and 4,455 voluntary ones. In 1968 the equivalent figures were 1,117 and 8,191. The Trade Indemnity Company recently reported a 21 per cent. increase in these figures last year. There is no doubt that smaller companies have had a very rough time.
Some hon. Members will have seen a projection, which came to us recently from America, that by the turn of this century it was likely that about 2 per cent. of the American population would be capable of keeping the whole of the rest of the Continent in everything they needed in terms of manufactured goods and food. A recent United Nations population projection suggests that the population of the world will be doubled by the turn of this century. As we are certain to be affected by that, I believe that we shall need the employment possibilities of these small firms.
Nine months ago the Government set up the Bolton Committee, and I modestly claim that I had something to do with that decision. I believe that that committee is on to a winner, and I should be interested to hear when it is expected to

report. I would suggest, with equal modesty, that if the Government were able to adopt some of the suggestions that I have made tonight they might get a substantial bonus in terms of economic return and electoral return. Such a return might not be wholly undeserved. Sadly, I doubt that the Government will be likely to grasp this opportunity.
I am delighted that we have now been joined by my right hon. Friend the Member for Enfield, West, who at least will be able to hear the last part of my remarks. I trust that he will take into account what I have said about the difficulties facing small companies and that these reforms may be introduced in his first Budget next year.

9.8 p.m.

Mr. Leslie Huckfield: I must of necessity be brief, so I shall not attempt to follow the remarks of the hon. Member for Croydon, North-East (Mr. Weatherill). I very much welcome the increases in personal allowances. I also welcome the fact that 2 million people have been relieved from the burden of income tax. I also agree with the benefits which will be gained from the Budget by increasing numbers of old-age pensioners, women who have to look after children and, indeed, by other categories in the population who will benefit from my right hon. Friend's proposals.
I should like to make one or two additions which I should like to have seen at least mentioned. For a long time many of us on this side of the House have advocated a wealth tax to replace the myriad combination of approximations to a wealth tax which already exist. If we wish to bring about some kind of tax reforms which have been suggested by hon. Members on both sides, the real solution is the introduction of a genuine wealth tax. If something on these lines could be introduced we could relieve some of the earnings sections of the population who are still being penalised by income tax.
I represent a vast cross-section of the population many of whom work in the coal mines in the car and textiles industries. I have had complaints from men that if they work overtime on a Saturday, or in other week-day evenings, they are penalised far too heavily by income tax. I wish to bring these complaints


to my right hon. Friend's attention. I hope that in future Budget we shall take far more recognition of this problem. Any help in this direction can lead to increases in productivity and I hope that something will be done.
Although I very much welcome the increase of £50 million made available by the Government to local authorities for mortgages, I should like to see further help given to young couples who want to buy their own houses. Many such couples are still experiencing severe difficulties despite the fact that the number of mortgages has increased to record level each year, and despite the option mortgage scheme and increased Government help to local authorities.
I was glad to note that nothing in the Chancellor's proposals could be said to give rise to any increase in prices. Although a prices and incomes policy has been operated we have been far too ineffective in keeping down prices. I hope that we shall not experience the kind of ludicrous price rises on the part of the people who make and sell things and for which my right hon. Friend is blamed as an effect of his Budget proposals. This is certainly not the kind of Budget which should lead to any price rises and I hope that the Government will be far more successful in controlling them in future.
I was also glad that we did not hear in the Budget any references to the need for statutory prices and incomes controls, as we have heard in previous Budget Statements. It was said previously that a Chancellor of the Exchequer felt he should use statutory controls on income as a major instrument of policy. We have proved that these do not work. I am sad to hear that the Conservative Party intend to rely on statutory controls on union activities.
We have heard a great deal of criticism from hon. Members opposite of my right hon. Friend's proposals. It is about time that we had some details about their own proposals. The public wants to know what they are putting forward as alternatives. We have heard that they intend to abolish the selective employment tax, putting about £600 million into the economy. We have also heard for some time that they will cut personal direct taxation. We have heard that not only will they maintain public expenditure on

most of the key social projects, but will also increase public expenditure on de-fence. We all want to know exactly how they intend to do these things.
I am glad that the right hon. Member for Enfield, West (Mr. Iain Macleod) is now present. I am sure that he saw tonight's comment in the Evening Standard
Unless Mr. Macleod is merely playing with words—and intends simply to rechristen S.E.T. as something else—these promises are not only the height of political irresponsibility. They are also certain to be broken.
The public knows that the Government have had a difficult time in at last putting our balance of payments right. The Government have had the courage, even in an election year, not to produce a give-away Budget. The public are appreciative of the success that this Government have had in turning a Tory deficit of over £800 million in 1964 into coming Labour surplus of the same amount in the coming year. But what the public, and especially hon. Members on this side of the House, want to know is exactly what the party opposite would have done instead. We have not been told. The Opposition are often saying that politics are being brought into disrepute.
The kind of Budget and honesty represented in my right hon. Friend's speech in the House on Tuesday does not bring politics into disrepute. It lifts politics to a decent, sane plane. The behaviour that we have observed of right hon. and hon. Gentlemen opposite in drawing completely false trails and red herrings before the public in failing to give one definite proposal of what they would have done instead, is what they ought to be attending to if they want to lift up the standards of politics.

9.11 p.m.

Mr. Michael Alison: The hon. Member for Nuneaton (Mr. Leslie Huckfield) has, I think, been connected with the motor industry, albeit as a driver. In reply to his request for the revelation of Tory policies, I give him this little analogy—"Wait for the Motor Show and you will see some very nice models unveiled." The hon. Gentleman will see them when the public have a chance of acquiring them, not before.
The House has had a rather thinly-attended but very wide-ranging debate this afternoon, touching on many aspects


of the Budget speech: the balance of payments, S.E.T., family poverty, the theatre, the "lump", and a whole range of other matters. It has also witnessed something of a record: my hon. Friend the Member for Croydon, North-East (Mr. Weatherill) addressing the House from a sitting position. I warmly congratulate him on this ordeal, which to me would be worse than struggling to my feet, even with a leg in plaster. My hon. Friend made an admirable contribution from that position.
I wish to pursue one particular theme; namely, the monetary aspects of the Chancellor's Budget judgment. The right hon. Gentleman on Tuesday said:
I therefore conclude that it is right to give a moderate stimulus to the economy, but to spread this between monetary and fiscal measures."—[OFFICIAL REPORT, 14th April, 1970; Vol. 799 c. 1230.]
Before plunging into the labyrinth of monetary policy, upon which I particularly want to concentrate, it is proper to make a passing reference to the Chancellor's idea of stimulus, because "moderate" really is the word to apply to the stimulus that he has given us. Its moderateness has been unnecessarily exaggerated in a sense by the way that the Chancellor trotted out all his wares for half an hour in the early part of his speech, as it were, to raise our expectations, and then gave so little away at the end.
The right hon. Gentleman rather reminded me of a rich but miserly whiskey distiller, since "stimulus" is the word that we are using, who spends half an hour showing someone over his bulging warehouse and the next two hours agonisingly computing whether he can afford to give away a whisky miniature. In the end the right hon. Gentleman brought himself to do so, but it looked a close thing.
I think that psychologically and in practical terms this is probably a mistaken way to set about giving the country a prospect and hope of the good things to come. First, we had a lot of cheerful talk about the record balance of payments, which is encouraging. We had a glowing account of the massive turn-round in the Government's financial accounts. We also had encouraging details of the huge inroads made into overseas debts. But, at the end of all

that, we are entitled to say, "Fine. So far so good. What is the pay-off?" As my hon. Friend the Member for Wan-stead and Woodford (Mr. Patrick Jenkin) said, what indeed is the pay-off? With huge expectations aroused, let us at least have something substantial at the end.
The pay-off, against the background of these colossal tax increases—my right hon. Friend the Member for Enfield, West (Mr. Iain Macleod) spelled them out with a vivid diagram in his television broadcast on Wednesday night; they have gone up like a layer cake year after year to the extraordinary figure of over £3,000 million, an increase of over 44 per cent. of the gross national product—is a miserly £220 million off the total. This is the merest sliver off the joint, and it is surprisingly disappointing to the country at large.
There have been hints in various papers that there may be second helpings and that the Chancellor has been talking in this vein in meetings with his own back benchers to offset some of the depression. But I doubt it. I do not know whether the Minister of State will be able to shed any light on this.
The depressing thing about the Chancellor's speech and the speeches the other day and today of the President of the Board of Trade is that on the external front—this is evidently the key to what we can expect this year and next—we are past the peak. The leads and lags seem to have worked themselves out, according to the Chancellor. Bank Rate seems unlikely to be attracting foreign money in the way that it did six months ago, and foreigners may already have taken their profit and begun to slip away. World trade is on a steadier and slightly less expansionary course, and in terms of debt repayment we are apparently down to the hard core. So it looks as if the Chancellor's concessions in this Budget have been made when our external improvement is at its peak.
But if this is all we get when things are at their best, what will it be like when the curve begins to level off or turn down? If this is what things are like when the wood is green, what will they be like when the wood is dry—which is the prospect which we must face? It seems as if the succession of Socialist Chancellors have treated the public rather like St. Simeon Stylites. They have


hoisted us to the top of a pole in the desert and there they propose to leave us. It was said of St. Simeon that he was a Syrian monk, the originator of a fearful form of asceticism which consisted of standing zealously day and night on the top of a column. The Socialists have hoisted the public to the top of an almost limitless desert column of taxation, and it looks as if they intend to leave us there. The sooner we get rid of that succession of Chancellors the better.
But the Chancellor, to do him justice, linked the idea of a stimulus to two agents and to one—the monetary and the fiscal. It is in the area of the monetary policy that I should like to look a little closely and consider whether the Chancellor has done anything to offset the modest concessions in the fiscal sector.
I should like to start by taking up the suggestion of the hon. Member for Ash-field (Mr. Marquand), in his eloquent speech last night, that the Chancellor should press forward with the good work which he has already begun over a wide field of forecasts and statistics in, for example, the fiscal or gross national product field, by extending this to improved forecasts, more specific figures and more systematic analyses in the monetary sphere.
Let me illustrate what I have in mind and what I think the hon. Member had in mind. First, to get any sort of a picture of the monetary impact of the Chancellor's measures one has to look around in his speech for the various dispersed references to these matters. It is rather like looking for prizes in a bran tub to find out the exact monetary data in the Budget. It is no use looking in the Budget Report for information about monetary factors, because, apart from a passing reference in the text, there is no mention either of money supply or of d.c.e. in any of the tables.
Next, one needs to try to make some sort of systematic offset against various conflicting movements in monetary factors. This is not done for us in any of the published figures. We need to know to what extent the movement in our overseas balance is likely to affect the domestic money supply in one way or the other.
A hint was given by the Chancellor that we can expect a tightening of the money supply this year because of the likely turn-down of the foreign surplus. Again, we want to know to what extent the public sector borrowing requirement is likely to offset the overseas balance effect, and to what extent the Chancellor's capacity to repay debt will be executed in the direction of the banks or of the non-bank public. All these are vital pieces in the jigsaw puzzle which hon. Members have to try to put together if they are to arrive at any sort of systematic picture of the money situation. Alas, we have no hard facts or figures at all here.
Finally, looking at the data aspect, one has to allow for errors. In this field, the errors seem staggering. The Letter of Intent led us to expect an expansion in d.c.e. in the current financial year of up to £400 million. In fact, the out-turn has resulted in no expansion at all. On the contrary, there has been a contraction of £200 million. This is about as close to fine tuning as dropping a piano. It is a monumental turn round from what we were led to expect. On the public sector, the negative borrowing requirement, which, again, is extremely relevant to the likely level of bank deposits——

Mr. David Marquand: Surely the hon. Member is wrong about the Letter of Intent. Surely it simply said that the Government would not exceed a figure of domestic growth expansion and did not say that it would be an end product. The whole point about the concept was that if there were a very good out-turn on balance of payments it would make it much easier to come within the target which was set.

Mr. Alison: I agree with that. Nevertheless, if one is trying to look forward, and a d.c.e. figure is given which refers to a margin of expansion up to £400 million, one's thinking tends to be in that direction rather than thinking there will be a contraction of minus £200 million. The forecast this year talks of a d.c.e. expansion up to £900 million and we know that the balance of payments will tend to be in less substantial surplus, so we are left even more in the dark. We are encouraged to think in terms of a positive d.c.e. figure whereas it may again turn out to be completely the other way and a negative figure.
Now let us take the negative borrowing requirement, which is another key statistic. This year, or rather in the financial year which has just passed, it was first estimated to represent a net debt repayment of £243 million. But by 25th June last year, when the Chancellor made his statement about the I.M.F. Letter of Intent, he had already raised this figure, the public sector net repayment figure, to over £300 million. In the event, the out-turn for debt repayment has proved to be nearly three times the original estimate with a net debt repayment of £600 million.
This is again massively at odds with the sort of forecasts given both in the Budget Report and in subsequent speeches by the Chancellor. The House should be under no illusion about the vital significance of these matters. The Chancellor has demonstrated his economic orthodoxy by coming out with a Budget judgment calling for a fiscal stimulus of £220 million-odd, designed apparently to set the British economy on course for a rate of growth in 1970 about 1½ per cent. greater than that achieved in 1969, after allowing for the multiplier effects.
But there is a growing body of opinion both in the United States and in this country that the confidence traditionally placed in tax weapons such as the Chancellor has used this year for managing the economy, for getting the precise increase in g.n.p. we have had suggested in the Budget Statement this year, the confidence that can be placed in fiscal fine-tuning judgments of this kind, is very little. Indeed the Chancellor may not only fail to get expansion but may get exactly the reverse.

Mr. Taverne: My right hon. Friend the Chancellor has specifically said that he looked for a relaxation both in the monetary and the fiscal field, and that monetary relaxation is not to be discounted.

Mr. Alison: I am glad that the hon. and learned Gentleman has made that point. I was going on to suggest that the Chancellor has unwittingly tightened the screw in the monetary sector, and that this is likely to be damaging.
There is a so-called new orthodoxy in these matters, or, the rather charming phrase now used in America, the "new, new economics", emanating from the Chicago school. Here I should like to quote from something which is really a tract of the times, the February Review of the Federal Reserve Bank of St. Louis, which says:
…monetary influences had a stronger, more predictable and faster impact on economic activity than fiscal influences.
If that is correct, if the "new, new economics" is on the right road and monetary influences are predominant, the Chancellor's Budget judgment, his fine tuning in the rather modest tax remissions he has made, is likely to be blown sky-high if he is not applying the same degree of precision and correctness to the monetary aspect of his policies.
Yet there is no real evidence that the Chancellor is getting a grip of these monetary factors, and what is here likely to happen in the economy in the coming year. The turn-round of the figures he gave last year is one illustration of the uncertainty of how these factors react.
The startling and radical allegation of the monetary school is that if we combine easy money with high taxes money always wins, that we shall get an economic expansion although we may not wish it. Conversely, if we combine tight money with relatively easy taxes again money will win and we shall get economic contraction, although we may be aiming in exactly the opposite direction. The sombre implications of this theory, whether or not it is true, for the present Budget are that the Chancellor, I believe, has almost accidentally stumbled into the second permutation, namely, that he has tightened the monetary prospects for the economy while loosening the fiscal valve, and the result will be exactly the reverse of what he expects. He has eased taxes, but unwittingly tightened up on money supply. The modest economic expansion he has budgeted for may turn into an economic recession which he has certainly not reckoned on. I hope to show that that may be a serious possibility.

Mr. Sheldon: The hon. Gentleman will be aware of recent studies which seem to suggest that the velocity of circulation is increasing.

Mr. Alison: There is much of what the Chancellor would call arcane argument about that, but certainly the monetary school has a theory that the velocity of circulation is more or less constant. I would prefer to look at the more demonstrable evidence that we have pointing in a slightly different direction.
We have heard a great deal about the wage explosion in the debate. If it is also true that money will be kept tight high wage increases in recent months will have the extremely undesirable effect of putting people out of work. As Peter Jay quite rightly argued in his article in The Times on Budget day, if money is kept tight while wages are allowed to rise someone is put out of work as a result of a lot more being paid to others. It will not have the effect of moderating prices because, unfortunately, the lag between the expansion or contraction of the money supply, the effect on prices, is a good deal too long for there to be an immediate compensation offset in prices.
The 64,000-dollar question is just how reliable or valid is the new orthodoxy. Does the money supply have
a stronger, more predictable and faster impact on economic activity than fiscal influences"?
There can be little doubt that recent British experience entirely validates the Chicago doctrine. Following devaluation in 1967 fiscal brakes were slammed hard on the economy. A total of £200 million was taken out of the economy in November, 1967, another £923 million was taken out in the next Budget of March, 1968, and a further £250 million was grabbed in extra tax impositions in November, 1968. So between November, 1967, and November, 1968, well over £1,000 million in taxation was taken out of the economy to attempt to slow it down as a result of the follow-through of devaluation.
The perverse net result was that following this huge extraction of tax money from the system the British economy expanded during 1968 at one of the fastest rates seen during the whole of the Socialist years in office—by about 4 per cent. Indeed, the Budget Report for last year stated plaintively:
an appreciable increase in personal consumption, which had been expected to fall in response to the Budget measures,
had occurred. The result was the huge inflow of imports in 1968 which led to a

massive visible trade deficit in that financial year.
The generaly acknowledged cause of this perverse out-turn of huge tax increases and at the same time substantial economic growth entirely validates the money supply thesis. The stock of money increased in the calendar year 1967 by 11 per cent., by a total of £1,300 million. The Federal Reserve Bank of St. Louis journal has calculated that there is a so-called "monetary coefficient" for the United Kingdom economy. It is a fascinating, if rather technical, concept. It means that we can broadly calculate the impact of changes in money supply on the gross national product.
The journal's tentative calculation is that for every £1 increase in the domestic money stock there will be a £2 10s. increase in the gross national product over the current and six following quarters. If this is the case—and it is a specific and deliberately calculated computation for the United Kingdom economy—we can readily understand how the huge increase in the 1967 money stock threw its influence right forward into 1968, and, indeed, into 1969. As the St. Louis Bank review puts it:
In early 1968, for example, the United Kingdom had an easy money-tight fiscal policy combination and experienced a continued economic boom in the second half of 1968 and through early 1969.
The worrying thing about the present Budget is that the Chancellor has thrown the two levers of fiscal and monetary policy in the opposite direction and has obviously introduced a slightly easier tax Budget but unwittingly has, I think, at the same time introduced a tighter monetary combination. This is what should concern the House. For example, I am prepared to bet that the Chancellor did not expect—I quote from his own words on Tuesday—monetary policy in 1969 to be restricted to the extent of increasing the money stock by only £400 million or 3 per cent.
I would be prepared to bet that he expected it would be a great deal more than that and that the actual out-turn of the money supply was a great deal lower. Yet I anticipate that the monetary stock will, in fact, be further reduced this year and that the monetary squeeze will tighten. First, this is obviously because the external balance will be less favourable. We have had that more or less


suggested and conceded from the Chancellor. We need not expect the substantial surplus on the balance of payments that we had in the last year. In consequence, tendency will not be to expand money supply in quite the same way that the favourable balance expanded it in the last financial year. Certainly, that is the impression I got, that the external balance is unlikely to contribute quite so much to the expansion of money supply in 1970 as it did in 1969.
If this is the case, and I believe that it will be—I believe that we have passed the peak of our external balance—then the money supply is likely to be tighter this year on that score alone. In combination with that, there is another factor which will tend to make money supply tighter. It is that the Chancellor has again budgeted for a staggeringly large public sector surplus as well as a central Government surplus.
I do not see it working out at any less than it was in the last financial year, which is getting on for £600 million to £700 million. The effect of this may likewise be to tighten the money squeeze. We know that when the public sector has a deficit, and is ogliged to finance this deficit, if the Government cannot get the public to lend it, then it has to borrow from the banking system, thereby increasing the money supply.
Conversely, if we get a private sector deficit and a public sector surplus—the present position—then there is no guarantee that the public will finance the deficit by surrendering stocks and bonds to the Government rather than by drawing down bank deposits. If bank deposits are drawn down we shall then get a second factor operating to contract money supply. So we have the possibility of a reduced overseas surplus, the possibility that the continuing enormous public sector surplus will have the effect of causing the private sector to draw down bank deposits, and the Chancellor has thrown in a third factor for good measure, namely, the increase in the special deposits called for from the clearing banks.
These are worrying and anxious prospects, and the signs are already to be seen in the way that money supply is likely to be going for 1970. In 1969 the seasonally adjusted increase in money supply was only £400 million, a tiny fraction of what it was in the boom

Callaghan year of 1966–67. If we look at the quarterly figures for notes and coin and bank deposits held by the public for the year ahead it seems to be almost certain that the first two quarters of 1970 are likely to be negative. We shall get no increase at all in the first half of 1970 in money supply. This is partly because the revenue quarter hits the public at this point and partly because, as far as I can see, we shall follow the same pattern as last year and again have a negative figure for the second quarter.
This means that there will be no increase in the money supply at all in the first half of 1970. If this be the case, I think that the Chancellor has thrown the machine into reverse when he meant to put it forward and that his modest increases in tax will have absolutely no effect, a snowflake on the lip of a volcano, in comparison to the overwhelmingly powerful effects of the severe contraction in money supply.
I ask the Chancellor to reassure us somehow that he will make certain that there will be an increase in the money stock in 1970 in accordance with the recommended Chicago percentage, namely of 3 to 4 per cent. in line with the potential growth rate of the economy, instead of a standstill. My view is that he will be well advised to take no risks in this matter, and he could easily give the necessary safeguards on the money supply front, first by going the whole way in abolishing import deposits, secondly, by scrapping as early as possible or reversing his decision to call for special deposits from the banks, and by conceding now the suggestion made by my right hon. Friend the Member for Enfield, West, supported by my right hon. Friend the Member for Kingston-upon-Thames (Mr. Boyd-Carpenter), that some extra special help should be given by way of family allowances.
I think that this is not the moment to run the risk in the wrong direction. The Chancellor should give the benefit of the doubt to those who argue that the money supply is likely to be restricted and should increase it now or take steps to moderate its contraction now rather than wait until nearer the autumn.
This would be the real test of whether the Chancellor was attempting to court electoral popularity, because it would be


far worse to allow unemployment to creep up towards the autumn and then to increase the money stock, than to take these measures now even though it looked as though he was trying to play to the gallery. He might thus possibly avoid a severe reverse effect in the expansion he expects, thereby throwing men out of work and making the prospect even bleaker than now.

Mr. Michael Shaw: On a point of order. Mr. Speaker. May I draw your attention to the fact that there do not appear to be 40 hon. Members present in the Chamber?

Mr. Speaker: Order. Strangers will withdraw. I shall now proceed to count the House.

Notice taken that 40 Members were not present:

House counted, and, 40 Members being present—

9.45 p.m.

The Minister of State, Treasury (Mr. William Rodgers): For one moment, I thought that I should be able to express my gratitude to the hon. Member for Scarborough and Whitby (Mr. Michael Shaw) and go home confident in the knowledge that the Opposition had nothing further that they felt they could say in criticism of my right hon. Friend's Budget.
We listened to a pleasant and engaging chat from the hon. Member for Barkston Ash (Mr. Alison), which was wholly in keeping with what his hon. Friend the Member for Worthing (Mr. Higgins) said yesterday about the extent to which this debate was a seminar, and for my part I should have been quite happy if our proceedings had come to an end at that point.
This is the first time I have taken part in a Budget debate, and I confess that I approach the task a little diffidently. I have no scars to show from difficult times past, and no credit to claim for any part that I might have played in the magnificent achievements recounted in the first part of my right hon. Friend's speech. I now find that my steel, not having been tempered in earlier days is unlikely to be tempered during this debate. There has

been no serious challenge to my right hon. Friend's Budget judgment, and the debate should really be about that essential central question.
At one point, the hon. Member for Barkston Ash moved in that direction, and I thought that he was about to say that my right hon. Friend had taken too cautious a view, but then he moved away, suggesting that the prospect was more gloomy than my right hon. Friend had expected and that, therefore, perhaps, he had not been cautious enough.
There is room for argument about every Budget judgment. A Budget judgment involves taking a view, first, of the course and tempo of the economy, on the basis of existing fiscal and monetary policies; second, of the maximum speed at which, over the period of the judgment, the economy can grow without producing bottle-necks, distortions and overheating; and, third, of how resources in the economy are likely to be allocated if no action is taken to interevene. Perhaps most and important and difficult of all, it involves taking a view as to how far that allocation is right not just in economic but in social terms, for it is this which essentially conditions the whole shape and content of the Budget.
In the debate so far, there has been little attempt, certainly from the opposition, to spell out either an alternative strategy or alternative fiscal measures. The right hon. Gentleman the Member for Enfield, West (Mr. Iain Macleod) is as entitled as anyone to do his bit of electioneering, as he did last night, and as the Evening Standard has reminded us he did. I was struck by the remark in the newspaper that
these promises are not only the height of political irresponsibiilty. They are also certain to be broken".
I agree about the irresponsibility, but I do not agree that they are almost certain to be broken, because we shall be able to save the right hon. Gentleman from facing up to that terrible dilemma.

Mr. James Dickens: Did my hon. Friend notice one glaring omission in the right hon. Gentleman's broadcast last night on television, namely, his failure to refer to that passage in his speech earlier yesterday in which he said that the Chancellor should intervene to prevent wage increases in the public sector of the economy?

Mr. Rodgers: My hon. Friend points to only one of many omissions in the right hon. Gentleman's observation. I only regret that in the time available I shall not be able to document them all.

Mr. Edward du Cann: The hon. Gentleman talks about omissions. There was an omission from the reference which he just made to my right hon. Friend. Will he be good enough to note the first paragraph in that leading article?

Mr. Rodgers: I should like to read the whole leading article and the right hon. Gentleman's speech if that would be for the benefit of the House, but I am not sure that it would be much to our advantage, and I could not produce the charts which, I understand, were part a the right hon. Gentleman's television broadcast. Far from allowing myself to be tempted in that direction, I must turn now to some of the rather prosaic elements, such as there always are in a Budget, and make some comments on them.
Not only has the Budget judgment, the central question, not been seriously challenged, but there has not been serious argument, either, about the decisions which my right hon. Friend has made within that judgment about fiscal measures. He made plain on Tuesday that he gave serious thought to the possibility of a significant switch from the taxation of income to the taxation of expenditure, and of course it would be possible in any year to think of a give and take Budget with a massive approach, on one side, and rather more given away, on the other.
And yet, although this might have been done, I think that it is clearly the view of the House, as it is the view of the country, that he proceeded in precisely the right way. Certainly, I have heard no voice of dissent from this conclusion, nor any demand that the should have put up purchase tax, excise duties, vehicle duties or S.E.T.
Turning to one or two points of detail raised in the debate or dealt with in the Budget statement, may I say to the hon. Member for Wanstead and Woodford (Mr. Patrick Jenkin) that I followed the points he made about Table 17. I can

say now there is no inconsistency between this and the Chancellor's statement. But the point is a very complex one to explain, and even if I understood it fully, I think that it would be better to leave it to my right hon. Friend the Chief Secretary, either in private conversation or in debate on Monday. I would not wish to mislead the House, never mind take up its time unnecessarily.
My hon. Friend the Member for Wolverhampton, North-East (Mrs. Renée Short) asked a detailed point about my right hon. Friend's proposals regarding S.E.T. and the theatre. She will remember that he did say that consultations would have to take place about the details of this proposal, and until those consultations have taken place I cannot really go further than he went.
May I mention another matter which has been of some concern during the debate, and that is the construction industry. It is very interesting to see the comments that there have been already about the outcome of my right hon. Friend's proposals. This was one of the important sections in the Budget. Hon. Gentlemen will have seen The Times Business News this morning, where it speaks of a Budget to boost the building industry's output, and the confidence which my right hon. Friend's proposals have created in this field, I think, was reflected also in the movement of share prices yesterday. The Financial Times actuarial share index for contracting and construction moved up 1·7 per cent. against a fall in the 500 share index as a whole of 0·3 per cent.
I mention this because there are important consequences here. I have looked at the movement today, and when I last observed it this ratio had not changed. So I think it can be said that the initial evidence is that my right hon. Friend's proposals not only will have a direct effect on industrial building and have an incentive value from the point of view of house building, but, also, that they will be reflected, we must all hope, in figures for employment and unemployment in the construction industry, and particularly in the developement areas; which is something I should welcome as I am sure the House would.
Hon. Gentlemen will have noticed that the fifth of the Ways and Means Resolutions deals with tobacco substitutes. I


think that I must say a brief word, following convention, about this. Since doubt was first expressed about the harmful effects of cigarette smoking, research has been going on into the possibility of making new materials for cigarette smoking which are less hazardous to health than traditional tobacco. This research has now reached a stage when further progress might be inhibited by provisions in the law, which, to safeguard the revenue from tobacco, have long prohibited the manufacture of substances resembling tobacco and have effectively barred the use of non-tobacco materials for mixing with tobacco in the manufacture of cigarettes. Under the law, the commercial use of tobacco substitutes, whether by themselves or mixed with tobacco could not be allowed in this country.
Even if my hon. Friends have not entirely followed what I have said—[Laughter.] I hope that they will take my word that this is a very important proposal from which we hope much benefit will come. But I must sound a note of caution. The proposed change in the law should not be taken—although this is not really a matter for me, or for this debate—as a sign that a safe cigarette is just round the corner. A great deal of further work has to be done. My right hon. Friend, through his proposal, is facilitating it. I do not want to mislead the House by something I say on a matter which is very serious and which I hope could have beneficial consequences.
I come now to my right hon. Friend's proposals as they affect decimalisation. Various approaches were possible, in particular the "swings and roundabouts" approach. My right hon. Friend has taken the opportunity to proceed further than this and to respond, on decimalisation day, to views which have been expressed, more recently by some of my hon. Friends, about the abolition of the duty on the cheque and the receipt.
Although it would be wrong to draw an exact analogy between duties of this kind and prices, I think that this gesture should be commended and should be evidence of how far decimalisation should be used not for rounding up but for rounding down and abolishing charges if that is possible. We considered all

the factors and the cost of the decision he has made, and I think that, not only for itself but for the example it sets, the House will welcome it.
Finally, I want to speak about incomes policy. Five years ago, I was associated with my right hon. Friend the Member for Belper (Mr. George Brown) in this matter. As my hon. Friend the Member for Ashfield (Mr. Marquand) mentioned last night, whatever lessons may have been learnt, that was a pioneering time, when an effort was made of a kind not previously tried and which in large part was successful. Whoever may be responsible for incomes policy, it must have two essentials to succeed in any way.
In the first place, there must be a very large element of consent, and, whether it is a voluntary policy or a statutory policy, if there is no co-operation and no good will, if there is a climate of opinion hostile to the policy, it cannot succeed. Whoever are in power will not create that climate if they go out of their way to persuade the trade unions that there is not a basis upon which they can co-operate.
Secondly, the policy can only succeed if there is no element of discrimination in it. I am profoundly shocked by the judgment of the Opposition in so far as they seem to suppose that it would be possible to have an effective voluntary prices and incomes policy which involved discrimination against the public sector. I ask them to think very hard again about this, both for reasons of consent and because the need for a policy of one kind is essential whoever are in power.
Whoever goes off on that course of discrimination, as the right hon. and learned Member for Wirral (Mr. Selwyn Lloyd) did in 1960–62, is bound to see his policy fail. I ask the Opposition, if they have constructive proposals in this matter, to set them out. They have not done so so far. The policy can only succeed if there is consent and if there is no discrimination, and both these elements are absent from their proposals.
We have had a quiet debate, but——

It being Ten o'clock, the debate stood adjourned.

Debate to be resumed Tomorrow.

MR. AND MRS. ALBERT CARTER (TRANSPORT ASSISTANCE)

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Ioan L. Evans.]

10.0 p.m.

Mr. David Winnick: Recently the House debated the Chronically Sick and Disabled Persons Bill. I am glad that that Measure received the unanimous approval of the House, and I hope that it will soon become an Act of Parliament.
I wish tonight to speak about one family in my constituency, the Carter family. I want to set out the details of their difficulties. For some years Mr. Albert Carter has been completely disabled. He is unable to drive a vehicle of any kind, and his wife needs assistance. They have four young children. What I want to bring to the notice of my hon. Friend is the need for the family to be given a car, or assistance towards the cost of running a car. I emphasise that the car will not be for Mr. Carter's use. It will be for use by Mrs. Carter who needs assistance. The Carter family live on a large council estate in my constituency, some distance from the centre of Croydon, and my hon. Friend will appreciate that is relevant to the point that I am making.
I first took up the Carter case about four years ago. I wrote to the Minister of Health, who explained to me that, while he appreciated the difficulties of this case, his Ministry was not in a position to help. I continued to write to the Ministry, and last year I wrote to the Secretary of State for Social Services. I should like to read part of the reply which I received from my hon. Friend who is to reply to the debate. He said:
Any extensions to the service, such as the more general issue of cars instead of three-wheelers which would result in an increase in the total cost, will I am afraid, have to wait until the economic climate permits. It would be misleading, however, to suggest that the provision of cars through the National Health Service for persons who, like Mr. Carter, would be unable to drive themselves is likely in the foreseeable future.
My hon. Friend concluded his letter by saying:
Mr. and Mrs. Carter's circumstances certainly command a lot of sympathy and I am indeed sorry I cannot help.

I do not for a moment doubt that my hon. Friend and my right hon. Friend the Secretary of State are genuine in their feelings of sympathy and concern. I am sure that they would both very much like to help. But it does not alter the situation that assistance is not being given, and is unlikely to be given for some time. My point is that a car should be supplied for the use of Mrs. Carter or, if that is impossible, that some assistance should be given towards the upkeep of a car. Mrs. Carter is rather fortunate in that she has a car, thanks to the generosity of her sister. Were it not for that she would be in a very difficult situation indeed. However, though she has a car, she receives no financial help from the Department towards its upkeep.
The position is quite clear. If Mr. Carter was being looked after outside the family circle, if he was in some kind of home, if there was no family to support him, the total amount of money which the community would have to spend would be far more than is being spent now.
Mrs. Carter is in special difficulty, with a disabled husband and four young children and living on a council house estate some distance from the centre of the borough. I am, therefore, right in pressing this case, but I appreciate that there are many more people like the Carter family where the husband or the wife is disabled and a car is needed.
As I said, I wrote to the Minister in 1966. I wrote again last year, and I decided to raise the matter again tonight because it seemed that there was hardly any chance that the circumstances in the Ministry would change. My hon. Friend's letter seemed to offer hardly any hope that in the foreseeable future assistance would be given. The time has come for the Department to review its policy. It may be that the Department itself is in difficulties and that we need on the front Bench someone from the Treasury.
I have looked at the Health Services and Public Health Act, 1968, which gave the Minister greater powers. During the passage of that Bill many hon. Members pressed for a wider category of people to receive motor car assistance from the then Ministry of Health. I hope my hon. Friend will be able to say that the 1968 Act is sufficient for this purpose without


the need for new legislation. The Department needs money to be able to apply the provisions of that Act.
There are many people who are in the same position as my constituents, and no doubt their Members of Parliament are pressing their cases, but I feel that we do not pay enough attention to disabled people and their families. The Chronically Sick and Disabled Persons Bill dealt in general terms with the disabled, but particular difficulties exist in families where one partner is completely disabled. If there were no Mrs. Carter to look after her husband, the total cost to the community would be far greater.
The House of Commons has an obligation to understand these difficulties and should be willing to spend money to enable them to receive the assistance which they require. The difficulties of a man who is chairbound for the rest of his life will be obvious to us all. If we really want to show sympathy and consideration let us supply the money, so that Mrs. Carter can be assisted with a car or with the cost of running a car, so that her problems can be considerably eased.

10.08 p.m.

The Joint Under-Secretary of State for the Department of Health and Social Security (Dr. John Dunwoody): I am grateful to my hon. Friend the Member for Croydon, South (Mr. Winnick) for having raised the difficulties of Mr. and Mrs. Carter and for the chance that he has provided to discuss them tonight. The fact that he has done this is an indication of the conscientious way in which he fulfils his constituency obligations and represents his constituents here at Westminster. As he has said, he has been in contact with my Department about this very difficult case since a few weeks after being returned as the Member of Parliament for Croydon, South.
Perhaps I might begin by expressing my admiration for the able way in which Mrs. Carter has looked after her husband and young family for so long. I may say that my Department has been in touch with this family for many years—since the start of the National Health Service, and there are a number of ways in which I am glad to say we have been able to help them. As my hon. Friend

knows, Mr. Carter had a powered single-seater road vehicle from us while he could use one, although he can, unfortunately, no longer do so. We have supplied him with any wheelchairs that have been necessary, and the local authority welfare services have also helped the family.
The problem which my hon. Friend has described is ultimately not one of failure to meet our commitments, but rather that the commitments themselves need to be widened; this raises the problem of resources and priorities. I endorse the implication of my hon. Friend that we are discussing primarily a question of resources and priorities.
I always find it depressing to be unable to give something which we could give if the resources available were greater. It is one of the paradoxes of progress that, as we learn more and more, acquire greater skills and provide more help for the disabled, we find that, because of the cost, we have to make a choice between one possibility and another. This is, of course, especially and increasingly true with the Health Service. Technological advance has led to a large number of developments which promote health and welfare, but the better the development the more expensive it often is to provide. There is a consistent improvement in the scope and achievements of the service, but we would all be glad if it could go faster. It is no consolation to the individual who needs help now to be told that his turn will come and that he must be patient.
Our provision for the disabled exemplifies the problem, and when I talk about "the disabled", I am not, of course, talking about some special group, apart from the rest of us, but about ordinary people who just happen to have been denied some of the advantages of life which the rest of us enjoy. We naturally want to do all we can to compensate them and help people like the Carters.
But this brings me to one of the crucial difficulties, that if we do something for one person we must be prepared to do the same for all in a comparable situation. We cannot be selective, because this would, of course, be palpably unjust. This is my answer to many of my hon. Friends who ask that an exception should be made for a deserving case.
Within the context of limited resources, we have to decide which groups of people most need help, and how far we can go to help them. We then have to devise criteria for identifying the groups concerned, and this means that there will be people who are excluded under the criteria. We have to say "no" to some requests for help, because it would be unjust to admit some exceptions and not others, and because in their totality these requests would add up to a greater demand on our resources than we can bear at present.
The present Health Service arrangements for providing powered road vehicles for disabled persons—or for giving some other assistance in lieu—all depend on the disabled person himself being able to drive the vehicle. It is not difficult to understand why this condition should have prevailed from the beginning of the scheme; the concept is that of restoring to an individual as much person physical mobility as it is possible to provide.
I am well aware that this criterion is not perfect, and any criterion inevitably involves a certain amount of hardship for those just outside a group whenever it is defined. But it is a worthwhile ideal and its adoption put Great Britain well to the fore as an enlightened provider for the disabled.
However, I do not want just to talk about the theory behind our objectives and how they should be defined. The practical situation is this: we are able to support our substantial and continually increasing commitment to provide vehicles for the disabled who can drive them but the extension of such issues to people who cannot drive would cost many millions of pounds, at a time when there are a growing number of important developments and pressing demands for other new and better facilities for the sick and disabled.
My hon. Friend underlined the increasing interest that exists in this House in this subject when he talked about the valuable Private Member's Bill which at the moment is being considered in another place.
It has been suggested that we might help the Carter family by exempting their vehicle from excise duty. This sort of exemption is provided under the

Finance Act, 1964, which is really not primarily the concern of my Department, but, like the invalid vehicle service which we operate, the exemption is limited to those disabled who themselves drive the vehicle.
The matter has been discussed on a number of occasions in this House and always attention has been drawn to the serious administrative difficulty in extending exemption to vehicles in which the controls are perfectly normal and have not been converted for use by a disabled person.
My hon. Friend has also suggested that we should consider paying a grant towards the Carter's transport, and, although I cannot make exceptions, I think that the general possibility of paying grants in certain cases is a matter which deserves serious consideration when we are thinking of ways to improve the service. I am anxious for all the advice I can get from those personally acquainted with the problems suggesting what improvements they consider desirable. I shall bear them seriously in mind. We can confidently claim to be well ahead of other countries in the provision of free vehicles to the disabled.

Mr. Winnick: I appreciate that this must apply in all cases. I am not arguing that only the Carter family should be assisted, and I went out of my way to make that point. I was interested and encouraged in what my hon. Friend said about grants. Could he say whether it would be possible to make progress reports in two, three, four or five months to give us some hope of progress in the near future?

Dr. Dunwoody: I will be able to answer my hon. Friend's point as I continue my speech, because I want to say a word or two about some of the investigations being undertaken by my Department. I think that we can be proud of our record.
Over the years since 1948 we have seen the vehicle provided for our invalids graduate from a wheelchair with a motor attachment to the present closed purpose-built machine capable of taking its proper place on the highway. The present vehicle is specially designed for the use of invalids not only so that they can enter and leave it with comparative ease, but also so that their personal needs for control


devices can be readily incorporated so that many who could not drive an ordinary small car can still be mobile in one of these vehicles.
The prospect improves further as we approach production of the new vehicle which we are to produce with a more powerful engine and automatic transmission. I myself have driven one of the prototypes of this vehicle and like others, have felt that it is another important step forward in seeing that the disabled people have a vehicle which is suitable for their needs.
The vehicle service commands an ever-increasing proportion of our resources. Over the last five years the expenditure on the service has doubled and now runs at £5 million a year. This rate of increase well exceeds, of course, that applicable to health provision generally, and our record in the Health Service as a whole is a good one. It illustrates our deep concern for the needs of the disabled. None the less, I know that improvements are possible, and it was for this reason that I asked for a review of the service within my Department to see what progress could be made, and I know that it is now nearing completion. One must decide to what extent the vehicle service should command additional resources in competition with other parts of the Health Service, but even within the vehicle service itself there are competing demands and priorities.
Apart from the claim that we should provide transport for the disabled passenger, there are other demands to improve the vehicle for those who already benefit from the scheme and the claims of those who receive no help whatsoever at the moment but who are only marginally less disabled than those who get the full benefit of the scheme. Again others ask that we provide cars instead of three-wheelers to those who would be able to use them, but as this must increase the total cost of

the service it could only be at the expense of those who at the moment get no help a all.
This is the dilemma that we face. If we extend the service, shall we be able to give a better service to those who have the service already or shall we extend it to those who have no provision at all at present? As an example, one could cite people who are virtually unable to walk not because of something wrong with their legs—an amputation or something like that—but because of some other disability such as a heart or lung condition. We do not at present help these people unless they are working, and yet many of the very worst disabled of them, who are unable to work through no fault of their own, would benefit immeasurably from the mobility that a vehicle would give.
There are other anomalies, too, all of which we shall consider in the course of this survey of the vehicle service which we are at present carrying out. This is a most complicated subject, and I intend to investigate fully all the proposals that have been put to me from many sources before reaching a conclusion.
I am grateful to my hon. Friend for raising this subject and for putting his views so that I can take them into consideration. It gives me no pleasure to repeat that we cannot offer Mr. and Mrs. Carter a vehicle under our vehicle arrangements. I can only hope that they will find some satisfaction in the knowledge that their experience has enabled this House again to recall the obligation and privilege laid upon all of us to ensure that everything possible is done to ameliorate the life of those whom disablement has robbed of basic enjoyments which the rest of us all too often take for granted.

Question put and agreed to.

Adjourned accordingly at twenty-one minutes past Ten o'clock.